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SCMP Reporter

LONDON: British consumers took on a record amount of credit in March, suggesting people remained confident ahead of a huge increase in personal taxes in April.

   Figures from the Central Statistical Office showed Britons took on a net GBP516 million (about HK$5.93 billion) of new credit, the highest monthly figure on record and well ahead of the net GBP336 million borrowed in February.

   Economists, who forecast an average rise in net credit of just GBP350 million, said the figures suggested that the recovery was proceeding steadily.

 ''The figures demonstrate the considerable strength of consumer activity in the lead-up to April's tax rises and adds to our confidence that even allowing for the taxes, British economic growth will continue strongly this year,'' said Marian Bell, economist at the Royal Bank of Scotland.

   Since the ruling Conservatives moved last November to push taxes sharply higher to help balance public finances, many economists have been concerned the recovery could be hit.

   But evidence from a range of economic indicators in March and early April appears to suggest consumers are relaxed about the extra GBP8 billion of taxes being levied this year, and are set to spend throughout this year.

  With increasing signs the residential housing market is at last recovering from a four-year recession which saw prices tumble as much as 30 per cent, economists are confident consumer sentiment will prove robust despite higher taxes in 1994.

   Economists said the strong credit figures, coming after a range of recent indicators suggesting the long-awaited economic recovery is alive and well, further reduce pressure on the British Government to cut base lending rates.

 ''The figures were significantly stronger than expected and are consistent with the notion that the economy at the end of the last quarter was robust enough to preclude the need for any further base rate cut,'' said Jeremy Hawkins, senior economic adviser at the Bank of America in London.

   British base lending rates stand at 5.25 per cent, with little prospect of a cut unless consumers start to recoil in the face of the sharp tax increases.

   But the underlying trend in consumer borrowing, a key guide to how consumers behave rather than feel, remains strong. In the first three months of the year, net lending rose slightly to GBP1.09 billion from GBP1.05 billion in the last quarter of 1993.

   A breakdown of the figures showed net lending by finance houses increased to GBP431 million in March from GBP342 million in February.



Credit boom defies looming UK tax rises