The British economy faces a rocky future, the governor of the Bank of England has claimed.

Mervyn King made his comments to BBC Radio 5 Live’s Wake Up To Money programme, explaining that overseas instability combined with a tightening credit market was likely to impact upon levels of consumer spending.

"Recent economic news has been dominated by the continuing turmoil in global financial markets, which has led to a tightening of credit conditions, particularly for the most risky borrowers," he said.

Borrowing will be more expensive and less readily available, continued Mr King.

For some debtors, the effects of the credit crunch are already being felt as refinancing becomes more difficult.

One possible route out of problem debt is an individual voluntary arrangement (IVA), an option created by the government to provide an alternative to bankruptcy.

IVAs allow debtors to pay an affordable monthly sum which is divided among their creditors.

Any interest is frozen and after a certain period of time, the individual is considered debt-free, and remaining borrowing written off.