For the second year running UK personal debt stands at a higher level than UK GDP meaning the country would have to dip into the proceeds from next year's GDP to pay off all its outstanding personal debt, scratching out what's owed on 8 January 2009.

Grant Thornton research shows that the total outstanding UK consumer debt amassed through mortgages, loans and credit cards has increased by 7.3% to £1,444 billion over the past year* up from £1,346 billion in June 2007. Furthermore, personal debt has forged ahead of UK GDP which, according to latest available data, currently stands at £1,410** billion having increased by 5.1% in nominal terms over the past year.

This shows that despite the credit crunch and stricter conditions on lending to individuals, the UK continues to suffer from its indulgence on relatively cheap borrowing over the past several years.

Stephen Gifford, Grant Thornton's chief economist, says, "Despite the global downturn flattening the growth of personal debt and UK GDP over the past few quarters, debt levels continue to grow at a faster rate than the income the UK generates."

"Although there is no cause for panic as personal debt is well covered by the UK housing stock, the figures clearly illustrate the continuing problem of growing personal debt levels in the UK. If the property market and economy continue to weaken, the current levels of personal debt will become unsustainable and there will be a marked increase in personal insolvencies," says Gifford.

Gifford says that it is individuals reaching levels of unmanageable debt rather than debt itself that is the problem and that up until the past year personal debt had been a good earner for the UK economy.

"UK economic growth has chugged along quite nicely thanks to rising consumer spending which has largely been on credit. While most of the debt is perfectly serviceable and secured on dwellings, the rising number of insolvencies and repossessions is testament to this process having a negative outcome for an increasing number of individuals," he says.

Over the past ten years personal insolvencies have risen from an average of 24,000 per year in 1997 to an average of over 100,000 per year in both 2006 and 2007.

Mike Gerrard, a personal insolvency partner at Grant Thornton, believes personal insolvencies are likely to increase even further as at the midway point in 2008, individual insolvencies stand at 49,607**** and the effects of the credit crunch are yet to fully feed through into the insolvency numbers.

"Typically, there is a lag between individuals facing tough financial circumstances and when they become insolvent. It will be the next six to 12 months which reveal how seriously the credit crunch has affected individuals," he says.

Gerrard says personal insolvency numbers will certainly rise above 100,000 for 2008 and are likely to eke toward a total of 120,000 for the year, although the more dramatic quarterly rises in personal insolvencies won't show through until potentially Q4 this year and the first few quarters of 2009.

The date when the UK can cover its consumer debt has arrived later and later in the calendar over the past decade. In 1997 and 1998 the point where UK GDP covered UK personal debt fell on tomorrow's date 23 August, the result of individual mortgage and personal debt amounting to £503 billion compared to the GDP of £786 billion and £541 billion compared to GDP of £841 billion respectively.

In ten years, the calendar date of this day has increased by some five months. Last year, for personal debt levels in 2007, the date when UK GDP covered all personal debt fell on 5 January 2008, this year it falls on 8 January 2009.

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