It is unusual for international economic watchdogs to deliver the same warning. Right now, however, their message is strikingly consistent.
Across much of the developed and emerging world, governments and businesses are carrying an extraordinary accumulation of debt. Public borrowing, private credit and loans supporting the artificial intelligence boom are all adding to the strain.
That offers little reassurance to Prime Minister Andy Burnham and Chancellor John Healey as the Budget approaches, but Britain is not facing this challenge in isolation.
Figures from the Institute of International Finance, the global banking industry’s main representative body, show that worldwide debt jumped by $10 trillion during the first six months of this year. The total now stands above $365 trillion.
Within the Western economies, the UK, United States, France and Japan are viewed as especially exposed because of their ‘persistently large deficits and rising interest expenses’.
Such pressures are more commonly associated with developing countries, where they can ultimately lead to a sovereign default or a restructuring of debt.
Latest data from the Institute of International Finance shows global debt spurted by $10 trillion in the first half of this year and now exceeds $365 trillion
The embattled G7 economies, Britain included, can generally sustain heavier debt burdens because their credit ratings are stronger and markets believe a default remains highly unlikely.
Despite the enormous cost of fighting two world wars during the 20th century, Britain has never failed to meet its debt repayments.
Argentina presents a stark contrast. A country known for its fierce football rivalry and long-running dispute over the Falkland Islands, it has defaulted on its debts nine times since 1816.
The Organisation for Economic Co-operation and Development has warned that the cost of servicing government debt could weigh on economic growth. US 30-year Treasury yields, meanwhile, have climbed to their highest point in 22 years.
The Bank for International Settlements in Basel, which brings together central banks, is concerned about the potentially dangerous combination of heavy government borrowing, leveraged hedge funds, stretched private-credit firms and richly valued equities tied to artificial intelligence.
The International Monetary Fund is watching developments closely ahead of its annual meetings in Bangkok, which begin on October 12.
Markets have been given ample warning. The volume and urgency of the alerts are notably different from the period before the 2008 financial crisis. The unresolved question is not whether vulnerabilities exist, but what event might finally set off a wider collapse.
In 1987, a dispute over interest rates between the US and Germany helped accelerate the stock market crash. Two decades later, the run on Northern Rock in Britain and the collapse of Lehman Brothers became defining triggers of the financial upheaval of 2007 and 2008.
Last year, serious trouble at Tricolor Holdings and First Brands exposed weaknesses in credit markets, but neither failure developed into a system-wide crisis.
My own suspicion is that the next shock could emerge from the vast sums pouring into artificial intelligence, data centres and related infrastructure. Much of that investment is debt-funded and bound together through a complex web of interconnected deals.
The cracks have not yet become visible, but governments are already uneasy about the AI boom. Australia is the latest country to raise concerns.
Broken glass
Chelsea supporters may still remember Autoglass fondly. The windscreen repair company featured on the club’s shirts from 1997 to 2001, a period in which Chelsea won six trophies, including two FA Cups.
Autoglass was largely built by South African entrepreneur Gary Lubner, who remained chief executive until 2023. The company later merged with Belron, an international business operating in the same sector.
The Lubner family still holds a 3.3 per cent stake in the enterprise that is aiming for a $35billion listing early next year, markets permitting. Lubner is understood to have favoured a London listing for a firm that has recognition and modern roots in the UK.
His successor, Carlos Brito – a former CEO of Anheuser-Busch InBev – wants a Euronext float in Amsterdam despite the London Stock Exchange being more liquid, analysed and traded.
There is a view that Belron will be less scrutinised tucked away along the canals in Amsterdam. Potential investors may be less enamoured.
Take-off
Logic tells us that in an age of AI and tech, the best shares to have invested in on the AJ Bell platform over the past five years would be drawn from America’s Magnificent Seven. Wrong.
Top of the pops is Britain’s most famous engineering group Rolls-Royce, with a five-year return of 1,080 per cent. Trailing in its wake comes chip-maker Nvidia, up 899 per cent.
Who would have thought?
