Chancellor of the Exchequer Rachel Reeves speaks during a visit to Studio Ulster in Belfas (Image: POOL/AFP via Getty Images)
Rachel Reeves is facing yet another headache after a leading financial expert warned the collapse of China’s property giant Evergrande could trigger tremors in the UK housing and banking markets. Mr Lyddon, a tax consultant, said: "With the de-listing of its shares, Evergrande ceases to have visibility, and the working-out of its problems becomes a purely domestic matter. The party is well and truly over.”
He said that the collapse of Evergrande is not just a Chinese problem but a warning for financial systems globally. The delisting marks the final step in the developer’s long decline, which has seen it fail to restructure massive debts and face liquidation proceedings in Hong Kong courts. Evergrande, once China’s largest property developer, owes around $45 billion but has almost no assets to cover it. He said: "There will not be any assets in Evergrande against the US$45 billion of debt, so that amount will need to be written off.”
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He added that if the same pattern emerges across other property giants like Country Garden, lenders could face losses of up to $250 billion, highlighting the scale of the potential global fallout.
Mr Lyddon, founder of Lyddon Consulting Services, said: "More concerning for us would be if the industry business model for residential property in the UK turned out to have been similar to that in China, only with our banks, rather than property development companies, taking the risk.”
He pointed to high loan-to-value mortgages and loans based on borrowers’ stretched incomes as triggers for trouble, warning that lenders with limited equity could face severe losses if house prices fall.
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He said: "The onset of adverse general economic conditions in the UK could easily trigger a house price correction of 10–20% from their inflated, post-Covid levels, with pockets of 30%."
Evergrande Group logos are seen on apartment buildings in Nanjing, China's eastern Jiangsu province. (Image: AFP via Getty Images)
He added that second-home hotspots are already "30% off their maximum.”
Such warnings suggest that even localised downturns could have wider consequences for homeowners who borrowed heavily at the market peak in a prime example of financial “contagion”.
Mr Lyddon said: "We would be right back in 2007/8, in the middle of the Great British Gordon Brown Financial Crisis—the GBGBFC." He warned that both homeowners and banks could suffer if the market correction he predicts materialises."
The scenario would put enormous strain on the Treasury and test the resilience of financial institutions across the UK.
He said: "The familiar Communist Five-Year Plan" describes the Chinese government’s strategy, which has so far avoided direct intervention, relying instead on stimulus.
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He said that homeowners in China have already seen property values fall by up to 30%, "with no sign of a meaningful bounce-back," leaving them financially constrained for years.
Mr Lyddon said Beijing's lack of direct intervention highlights the crisis's unpredictable nature and underscores the potential for long-term market disruption.
For Ms Reeves, who has been Chancellor for just over a year, Mr Lyddon’s warnings represent both a political and an economic threat. He said that a sudden downturn in UK house prices could leave the Treasury scrambling to protect households and stabilise banks, putting Reeves at the centre of a crisis she cannot control.
Analysts say a financial shock of this magnitude would test her leadership and economic credibility while the Government is already under pressure over cost-of-living issues and public spending priorities.
He said: "While British banks do not appear to be heavily involved themselves, the structural parallels in lending practices mean the UK is not immune. If the housing market correction materialises, Ms Reeves could find herself presiding over a domestic financial crisis triggered, in part, by lessons unheeded from overseas."
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Mr Lyddon added that the UK’s reliance on high loan-to-value lending and inflated house prices makes the financial system particularly vulnerable to sudden shocks.
As Evergrande disappears from view, Mr Lyddon said the real test for Ms Reeves may lie in whether she can shield Britain from a chain reaction of bad debt, falling house prices, and investor panic—a nightmare scenario unfolding hundreds of miles from Westminster but with potentially devastating consequences at home.
His warnings underline the precariousness of the UK housing market and the political pressure building on the Chancellor as she navigates a landscape shaped by overseas financial upheaval.
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