‘The End of Britain’ – where we get our figures

You’ve probably seen our controversial new report about Britain’s debt problem.

As we expected, it’s already generated a huge amount of interest. We’ve had scores of people getting in touch with us to ask for more information, particularly about how we’ve come to our conclusions.

So, if you’re worried about Britain’s debt levels, and you want to do some research of your own, here’s a breakdown of our sources.

Charts on public debt and spending

All of these charts are sourced from http://www.ukpublicspending.co.uk/ – an independent website dedicated to publishing information concerning Britain’s finances.

If you’d like to check these graphs yourself, visit the website and enter the dates you’d like to look at. In our research, we’ve used 1900 – 2015 as the parameters.

It goes without saying that all of these figures have been checked against the Treasury’s own numbers to ensure they are accurate. Again, if you want to take a look for yourself you can do so on the Treasury Website: http://www.hm-treasury.gov.uk/

UK Total Debt Chart

It’s difficult to find one single figure for the UK’s total debt. Late last year, Haver Analytics and Morgan Stanley published a chart showing Britain’s total debts at around 950% of GDP. This figure includes household, public, corporate and financial debt. Here it is:

end_of_britain_graph

Our editor John Stepek and senior writer Phil Oakley both thought the 950% figure seemed a little high. So they set about compiling their own figures.

Using data from the Office for National Statistics (ONS), Credit Bulletins from September 2012, Bankstats Data, Treasury Bulletins from 2012, and research from the McKinsey Global Institute they found that our debt to GDP ratio is over 500%.

This figure is broken down as follows:

DEBT % of GDP In £ terms (approximately, £bn) SOURCE
UK Household Debt (mortgages plus unsecured debt) 91.6% £1,415 Credit Action bulletin Nov 2012
Non-financial Corporation Debt 109%* £1,683 McKinsey Global Institute – Debt and Deleveraging: Uneven progress on the path to growth (Jan 2012)
Financial Institution Debt 238.9% £3,688 Bankstats September 2012
Government debt (Excluding Financial Interventions) 69.2% £1,068 Office for National Statistics
TOTAL – 508.7%

* This figure comes from a McKinsey report which calculated the data as of Q2 2011, so this is an estimate of the current value, but we do not believe a great deal of deleveraging has been done in the non-financial corporation sector since then.

As you can see, the total comes to just over 500% debt to GDP. Just to be clear, we’ve actually updated the GDP figure used to account for the latest UK GDP data which was released today (November 27th 2012). This stated that UK GDP for the year up to and including the third quarter of 2012 was £1,544bn.

Then we also added in the cost of the financial sector interventions, unfunded public sector pensions and PFI, as you can see below.

DEBT % of GDP In £ terms (approx, £bn) SOURCE
UK household debt (mortgages plus unsecured debt) 91.6% £1,415 Credit Action bulletin Nov 2012
Non-financial corporation debt 109% £1,683 McKinsey Global Institute – Debt and Deleveraging: Uneven progress on the path to growth (Jan 2012)
Financial institution debt 238.9% £3,688 Bankstats September 2012
Government debt (excluding financial interventions) 69.2% £1,068 Office for National Statistics

Financial sector interventions

71.1%

£1,098

Office for National Statistics

Unfunded public sector pensions (incl. Royal Mail)

306.3%

£4,729

Office for National Statistics report April 2012

PFI

15.7%

£242

Treasury 2012

TOTAL DEBT = 901.8%

When you add in all these figures, Britain’s total debts reach just over 900% of GDP.

And even this figure doesn’t include future healthcare costs.

The Welfare State. We’ve drawn our facts from a variety of sources, including the BBC and World Bank Data.

The Argentinian Debt Collapse. Federico Tessore owns Inversor Global MoneyWeek’s sister publication in Argentina. He worked for a major international bank during the debt crisis in 2001.

We hope that helps you understand how we have come to our conclusions. You can view our report today by clicking here.