For the second year running, the total amount of money owed by people in the UK is higher than the total income generated, figures published by accountants Grant Thornton revealed.

Personal debt in the UK, in the form of money owed through mortgages, loans and credit cards, increased by 7.3% to £1.444 trillion in the year to the end of June.

In contrast, the UK's gross domestic product (GDP) rose by just 5.1% to £1.41 trillion, making it the second year running in which personal debt has outstripped GDP.

As it stands the UK would have to dip into the proceeds from next year's GDP in order to pay off the total oustanding debt. The current debt would not be paid off until the 8th January 2009. The date when the UK can cover its consumer debt has arrived later and later in the calendar over the past decade. In 1997 and 1998 the point where UK GDP covered UK personal debt fell on the 23rd August.

Last year was the first time that the country's 60 million people owed more to the banks than the value of everything made by every office and factory in the country.

The data suggested that the credit crunch had yet to halt the UK's indulgence in relatively cheap borrowing, said Stephen Gifford, chief economist at Grant Thornton. "Despite the global downturn flattening the growth of personal debt and UK GDP over the past few quarters, debt levels continue to grow at a faster rate than the income the UK generates. "Although there is no cause for panic, as personal debt is well covered by the UK housing stock, the figures clearly illustrate the continuing problem," said Gifford. "If the property market and economy continue to weaken, the current levels of personal debt will become unsustainable and there will be a marked increase in personal insolvencies."

The research further darkens the storm clouds gathering over the British economy. The number of individuals declaring themselves bankrupt has soared to record levels in the past couple of years. The Department of Trade & Industry recently reported a 35.6% increase in personal insolvencies in the second quarter of this year, compared with the same period in 2007. Statistics show the number of people declaring themselves bankrupt or signing up to an individual voluntary arrangement rose from 24,000 in 1997 to more than 100,000 this year.

Sue Edwards frmo Citizens Advice said the majority of its work was still related to financial issues, and that it has seen a shift towards people struggling to meet day-to-day living expenses.

"More people are coming to us now because they are worried about not being able to pay their essential household bills and continuing to rack up mortgage arrears, fuel debt and council tax debt."