The UK is entering a period in which interest rates are expected to start rising again – with the first moves potentially coming later this year – having insufficiently dealt with the debt overhang. This leaves the UK economy vulnerable to even modest increases in interest rates.
Deconstructing the debt overhang will not be costless, but it is in everyone’s interests – borrowers, lenders, government and taxpayers alike – to adopt a pro-active measured approach rather than simply allowing it to collapse. We favour an orderly and managed dismantling of the debt overhang. This report sets out a series of recommendations for lenders, borrowers and policy-makers to make that happen.