Credit crunch wipes out £600bn
Around £600bn worth of wealth may have been wiped out in the UK because of the credit crunch, an analysis by PricewaterhouseCoopers has revealed.
The study, conducted by PwC economists, focused on the impact of the credit crunch on the British economy over the twelve months to June 2008.
The report estimates that the downturn will cost between £12bn and £16bn in lost expenditure over the next year, equivalent to around 1 per cent of Britain’s GDP.
John Hawksworth, head of macroeconomics at PwC, said: “The analysis concerns the impact of the credit crunch on the two most severely and directly affected sectors, housing and finance.”
He said: “The fall in UK house prices that began in September 2007 has driven down the level of wealth tied up in UK housing by around £400bn, representing a 9 per cent fall of the value of the UK housing stock over the twelve month period ending in June 2008.”
In addition, the financial sector, the other area the economists monitored in the study during the same period, suffered a loss of stock market capitalisation of some £200bn, he added.
Based on previous studies, PwC has estimated that British businesses and households could reduce their spending by £12-16bn as a result of the turmoil. But the lagged effect of reduced wealth on expenditure means this reduction would take a year or so before the effect is fully felt.