Bad debt – ‘Too soon’ to claim bad debt peak

Barclays made the comments in its half-year report which showed that bad debt had eaten into its profits, particularly in its credit card arm, Barclaycard.

“We expect retail conditions in the UK to remain challenging in the second half of 2006 as impairment trends continue to be affected by the rise in average balances and the growth in personal bankruptcies,” said chief executive John Varley.

The warning comes as the Barclays report shows that bad debt levels rose by 50 per cent at the bank as more people struggle to pay off what they owe.

Britons’ rising debt levels have led to a surge in people filing for bankruptcy while all the other major banks have also experienced a rise in what are known as “impairments”.

A likely effect of this is that banks will tighten their lending criteria or introduce charges to recoup the money they are losing as they expect more people to fail to clear debt.