Personal debt levels `holding back economic recovery`

Economic growth is being held back by the numbers of people repaying debt rather than spending money, according to Bank of England Governor Mervyn King.

Mr. King said that although there are signs that the UK economy is growing once again, companies and individuals are focusing on repaying debt rather than spending money on goods or services, restricting the amount of money flowing through the economy.

The news comes shortly after the announcement that annual inflation (CPI) had fallen from 1.8% in July to 1.6% in August.

A debt expert for Think Money said: "From a borrower`s perspective, it`s encouraging to see so many people tackling their debts head-on. In a difficult time for the economy, it`s wise to carry as little debt as possible.

"Of course, many people may find that their debt repayments are unaffordable - and it`s important that anyone in this situation seeks debt advice as soon as they can."