UK’s Financial Sector Smack-Dab in the Crosshairs, and So Is the Pound
I think it’s fair to say the UK benefited most from the cross-border financial services boom measured from 2000-2007, which abruptly ended thanks to the credit crunch. And on the flipside, the UK will be the developed-world country that is hit the hardest as private market deleveraging intensifies and the cross-border global financial services industry declines.

First, on a household debt-to-gross annual-disposable income measure, the UK consumer ranks among the world’s highest. Interestingly, consumers in the UK have only just begun to pay down their debt. 

 

And second, the Bank for International Settlements (BIS) — considered the central bank for central bankers — expects the global financial sector to decline in the years to come. This is bad news for all global financial centers. But it’s particularly bad news for London, which is still highly leveraged to global financial services.

Below is what McKinsey dubs its “Global Deleveraging Scorecard.” As you can see, the UK consumer is highly indebted and has made little progress in paying it off over the past three years. In fact, their debt ratio is down just 6 percent from its peak, whereas the U.S. ratio has fallen 11 percent. finance has a dark side....Financial development can create fragility. When credit extension goes into reverse, or even just stops, it can induce economic instability and crises. Bankruptcies, credit crunches, bank failures and depressed spending are now the all-too familiar landmarks of the bust that follows a credit-induced boom.

....... Jack Crooks