Recession warning may signal rise in debt management need

The number of Britons needing debt management plans could be set to rise as a warning has been issued that the risks of a new recession have soared.

Shroeder's Asset Management has said recent events in Greece and now Italy have led to it revising its forecasts, with the latter country's rise in bond yields above seven per cent.

This means it is becoming less likely the government there will be able to pay its debts – increasing the chances of an Italian default.

With many banks "on life support" with help from the European Central Bank, a new credit crunch is likely as many find themselves unable to lend to businesses.

The organisation concluded: "We are now forecasting a serious recession in the eurozone in 2012, which is also likely to result in recessions in the wider European region, including the UK."

Such a gloomy picture may hit some individuals hard, not least those who may lose their jobs through redundancies if there is a new recession and trade with the EU falls because of it.

Those ending up out of work because of this may find they are suddenly unable to handle credit card debt and other borrowings they were previously able to fund.

Another asset management firm, BNY Mellon, said one reason for the rising bond yields and growing risks of default in Greece and Italy is that there is some doubt whether the political will and consensus exists to drive through necessary reforms to cut the deficit, something it said does at least exist in Spain.

By James Francis