News & Views - Savantor

Gloomy outlook in the UK

Monday, 15 August 2011

Recent events in the UK have given little cause for celebration with ever more gloomy economic forecasts preceding public unrest in many city centres and there seems little sign of the gloom lifting in the near future.  The BRC Consumer Confidence Survey revealed that while the number of people who feel optimistic about their finances and job prospects has increased slightly in recent months, the majority of people remain gloomy about household budgets with the number of consumers without spare cash reaching "a new record high".

The survey has revealed how consumer shopping habits have changed due to the Government spending cuts and the rise in the cost of living.

·         71% have changed their shopping habits, while almost two thirds have switched to buying cheaper grocery brands.

·         Three-fifths of Britons are pessimistic about the state of their personal finances and

·         32% feel they have no cash left over after their regular outgoings have been met,

The report does contain a glimmer of hope, with the consumer confidence index rising five points to 72 between the first and second quarters of the year. But the proportion of people who feel optimistic about their job prospects for the coming year (19%) still pales in comparison to the proportion who remain pessimistic (73%).

A key point of interest to the credit card industry is that the survey revealed that households that do have money left over after paying for essentials are choosing to bolster their savings or pay off debts, such as credit cards, rather than spend on the high street.  Earlier this month the BBC asked 32 leading economists for their predictions into when the base rate would be increased. 26 forecasted that rates would not rise this year, while three predicted that there would be no change until 2013.  So with the Base rate likely to stay at 0.5% until early 2012 and credit card interest rates reaching a record average high of over 19% earlier this year it seems more likely that paying off credit card debt will be the priority.  It appears that we are set to continue the trend of less spend on credit card more use of debit card as consumers look to maintain control of spending.

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