BY THE end of February this year, people in the UK owed a total of £1.578 trillion.

It’s a figure so enormous it’s almost impossible to understand what it really means, but when you start to break it down it becomes truly frightening.

At a household level, the average total debt – including mortgages – was £58,119. Per adult, the average debt was £30,537, up by almost £1,170 on the previous 12 months, and about 114 per cent of typical annual earnings.

The latest statistics, compiled by The Money Charity, also show that we pay a total of £139 million per day on average in interest repayments on personal debt.

The charity, which works to help people manage their money as part of everyday life, has been producing a regular summary of the UK’s financial health since 2005. Its number-crunching throws up all sorts of alarming figures.

Did you know, for instance, that 276 people a day on average are declared insolvent or bankrupt? Or that Citizens Advice Bureaux in England Wales deal with 4,199 new debt problems in every 24-hour period?

In short, we are living way beyond our means or, as one of the country’s top financial regulators put it: “There are a significant number of households that are in so deep that the slightest sign of rough weather could see them in over their heads."

Jonathan Davidson, executive director of supervision for retail and authorisations at the Financial Conduct Authority (FCA), told a credit conference last month that customers were vulnerable to any changes in their circumstances, and to changes in the external economic environment: "They might be able to just about afford any loans you grant them today, but it is far from certain that they will be able to do so in the future."

And the problem is not just about debt; according to the Money Advice Service, almost half of all adults in the UK – about 21 million people – don’t even have a savings buffer of £500. The number of households with no savings at all increased by 340,000 in the last year.

The problem is made worse by insecurity in the job market which means many people can’t rely on a steady income and can’t, as a result, make regular savings. So, when that unexpected repair bill or other essential expense arises, they have no option but to turn to credit.

And if, like two million people in the UK you don’t have a bank account, or you don’t have access to affordable credit, that means borrowing money at high interest or falling into the clutches of the loan sharks.

So there has never been a time when credit unions – like the Bradford District Credit Union BDCU), which this week celebrated a £100,000 grant from Lloyds Banking Group to expand its services – were more badly needed.

A credit union is a financial co-operative which is owned and controlled by its members, the people who use their services, and not by external shareholders or investors. It encourages regular saving, usually of very small amounts, and provides low-interest loans, while offering financial advice and a range of services to its members.

BDCU asks members to save a minimum of £3 per week (or £1 per week for the unemployed).

It makes loans of between £200 and £7,500 but it looks at members’ income and expenditure to ensure that loans are affordable.

At the end of the year, any surplus it makes – after running costs and contributions to its reserves – is given back to members in the form of a dividend.

Membership of a credit union is based on a “common bond”, such as people living or working in a specified geographical area, or even working for a particular employer. The common bond of the Felix Credit Union, based at the St Patrick’s Centre in Sedgefield Terrace, in Bradford, for instance, is that it is for people associated with the Dominican community in the St Patrick’s church parish.

The first credit union in Britain was set up in 1964 and the movement has grown to provide loans and savings to almost one 1.3 million in the UK, employing more than 1,700 staff. The Association of British Credit Unions Ltd (ABCUL) estimates they have total assets of more than £1.5 billion and made loans of more than £800 million in 2017.

They are also a worldwide phenomenon, with more than 60,000 credit unions and 223 million members.

Importantly, credit unions also enjoy Government support. In 2013, it made a £38 million investment in modernising and expanding credit unions and last week the economic secretary to the Treasury, John Glen MP, announced important legislative changes to allow the number of potential common bond members to grow from two million to three million.

And from this year more money recovered from illegal money lenders will be allocated to incentivise vulnerable people to join, save, and borrow with a credit union “instead of turning to loan sharks".

But the amount of affordable credit required to meet the needs of those tempted to turn to loan sharks is estimated at £5 billion, which means the number of credit unions needs to increase dramatically.

With the staggering rate of growth in household debt, the question is can credit unions ever fill the gap? And what happens if they can’t?