The UK's private debt crisis will make this recession so much worse | Christine Berry

People and businesses were already over-indebted before coronavirus. The government's schemes have made things worse

The UK is drowning in private debt. At least 6bn of household debt - and probably much more - has been racked up by 4.6m people during the pandemic. More than one in eight people on furlough have defaulted on a payment. The Institute for Fiscal Studies has warned of a wave of zombie companies", kept afloat by Covid-19 loans, going bust this autumn. There will be no V-shaped recovery" - and recognising the scale of over-indebtedness is key to understanding why.

UK households and businesses were already over-indebted before the pandemic. Many were struggling to make ends meet. This made our economy extremely fragile - even more so than before the crash of 2008. And yet, back in April, the government chose to deal with the shutdown in large part by loading households and businesses with even more private debt. Businesses were encouraged to take out state-backed loans. Households got payment holidays" on mortgages and credit cards. These measures did not lighten the increased financial burdens people were shouldering. They simply kicked the can down the road - with added interest.

These debt burdens will not only ruin lives, they will also drag back the economic recovery itself

Related: UK consumers repay record 7.4bn of debt in Covid-19 lockdown