In a brief, but fascinating and accessible article a team of economists look at the relationship between finance (as expressed in credit to GDP ratios) and growth in developed and emerging economies and focus on the EU.
Chong, E.Y. L., Mody, A., and Sandoval, F V. (2017) Finance and growth: The direction of causality. Vox EU. 17 January 2017. http://voxeu.org/article/finance-and-growth-direction-causalityThe key finding is that when credit-to-GDP ratios exceed 90% economies slow down. And this is particularly noticeable in the EU. However, the authors also say that as economies slow down beyond this 90% ratio, it leads to more rapid expansion of the finance sector. Causality could point both ways.
The authors conclude:
"One interpretation of the data is that beyond about 90% of GDP, additional credit is largely counterproductive. The evidence certainly supports that inference. Especially after 1990, many advanced economies exceeded the 90% of GDP credit threshold, and more credit beyond that level is associated with lower growth. Also, emerging and developing economies have credit-to-GDP ratios below 90% of GDP and in those countries, more credit has been associated with higher growth."
"The data are, however, also consistent with an alternative interpretation, one in which the causality runs the other way. Emerging and developing economies start from relatively low incomes and have, on average, higher growth potential. As they grow to realise that potential, the demand for finance leads to greater financial development."
Getting an accurate and trustworthy figure what that the private sector debt in the UK currently is can be difficult because mainstream economists still see it as irrelevant.