The West Midlands is sitting on a “ticking timebomb” of personal debt, one of the region’s leading accountants has warned.
Individuals are racking up huge credit card bills at a time when economic uncertainty is putting jobs at risk, according to Andeep Mangal, named president of the Birmingham and West Midlands Society of Chartered Accountants on Monday.
He began his term of office declaring the region faces tough times as the credit crunch bites even deeper.
A partner in Birmingham accountancy firm Thapers, Mr Mangal deals mostly with small and medium-sized companies. He says the problems his clients face are reflected by the money woes many of their employees are having to grapple with.
Nationally, unsecured debt in the UK has hit £1.4 trillion after ten years of easy credit.
But a combination of higher interest rates and rising prices are putting many borrowers into danger of bankruptcy, experts say.
“The credit crunch and rising cost of fuel prices mean there are tough times ahead for the clients we advise,” Mr Mangal said.
“There is also a ticking timebomb with the explosion of credit card debt as more people use them to finance other expenditure.”
The soaring cost of food, fuel and petrol is putting an increasing strain on household finances, and many are using credit cards as a stopgap.
“This is a serious problem and is one I don’t think has been widely reported. Rather can cut back on spending they are trying to finance things on credit and a number of households are finding themselves unstuck.
“Everyone is feeling the pinch, not just in rising prices but in the economic downturn as well.
“Confidence is very low and there is a lot of bad news about at the moment.”
Mr Mangal also said he was seeing more companies go to the wall than at this time last year.
A number of recent announcements have underlined the problems faced by companies in a range of industries across the West Midlands.
In the finance sector, Norwich Union is expected to axe about 300 jobs at its Birmingham office as part of a major restructuring of its general insurance arm over the next two years.
And in IT, the threat of redundancy is hanging over the heads of up to 500 employees at Birmingham-based computer services support group Serco.
Meanwhile, the downturn in the housing market means that as many as 15,000 estate agents across the country could lose their jobs, a report warned recently.
Rising levels of unpayable personal debt have resulted in counsellors in Birmingham becoming swamped with calls for help.
The city’s Citizens Advice Bureau reported last month that it had taken on 4,000 new cases in the first five months of this year alone.
National Debtline said the average family owes about £5,000 at a time when bills are rising by the month.
Aid agencies say the problem is not confined to the unemployed or low paid. Middle class families are suffering as well.
A report to be published tomorrow will show that despite soaring indebtedness card providers are still swamping consumers with offers of easy credit.
The personal finance website uswitch is expected to report that in the past 12 months 84 per cent of card applicants, or 4.8 million individuals, were not even asked to provide proof of income or declare their outgoing