As if Theresa May did not face enough challenges, the latest survey from The Bank of England (BoE) suggests the British consumer is about to face the biggest credit crunch since the great financial crisis.

After repeated warnings from BoE about the surging pace of lending to households, British lenders are planning the biggest cutback in consumer loans in nearly 10 years (BoE's quarterly net balance of lenders' expectations for the availability of unsecured lending over the next three months fell to -28.6 from -16.2.)

Earlier this year the BoE warned lenders may be dicing with a "spiral of complacency", with car loans a particular area of worry, and now, as The New York Times reports, this latest survey signals the steepest contraction since the fourth quarter of 2008, when the economy was in the depths of its worst post-war recession.

Thursday's survey figures showed Britain's consumer economy is running out of steam, said Joanna Davies, economist at Fathom Consulting, the only forecaster in recent Reuters polls to predict a recession.

 

"We're quite concerned about the consumer squeeze," Davies said, citing falling wages in inflation adjusted terms and historically low household savings.

 

"If you add tightening credit conditions onto that, it doesn't bode well."

Pouring more cold water on Britain's recoveryt hopes, after seven years of persisting with a forecast of rebounding productivity, the Office for Budget Responsibility (OBR) has thrown in the towel.

“As the period of historically weak productivity growth lengthens, it seems less plausible to assume that potential and actual productivity growth will recover over the medium term to the extent assumed in our most recent forecasts,” the watchdog said.

 

“Over the past five years, growth in output per hour has averaged 0.2 per cent. This looks set to be a better guide to productivity growth in 2017 than our March forecast.”

That paints a gloomy picture for future economic growth, pay rises and the government’s finances.

The report notes that “some commentators have argued that advanced economies have entered an era of permanently subdued productivity growth for structural reasons”.