Strategic Finance
Households and businesses still fear for finances |
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| Strategic Finance | |
| Written by Catherine Murray | |
| Monday, 23 August 2010 | |
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New surveys show householders and businesses remain pessimistic about their finances and economic prospects. A survey by financial information group Markit and YouGov found that 47 per cent of British households expected their finances to worsen in the next 12 months in August, slightly lower than in July but higher than any other month since March last year. 25 per cent of households expected their finances to improve, slightly higher than the low of 21 per cent seen in July. Fears about job cuts, rising prices and a weak housing market are however making Britons more pessimistic about their household finances, the report says. Public sector workers remain particularly nervous, with big government spending cuts on the horizon, but the concerns are spreading to the private sector, according to these latest household finance figures. "Stronger growth in the UK economy has done little to put a floor under the downturn in household finances," commented Markit economist Tim Moore. The UK economy grew by 1.1 per cent in the second quarter, well ahead of expectations, but Bank of England governor Mervyn King warned that not too much should be read into this data. King later lowered the Bank's forecasts for economic growth in 2011 to 2.5 per cent in 2011, down from a previous forecast of 3.4 per cent. Households are worried about inflation as well as slow economic growth, with 86 per cent of those surveyed saying they expect the cost of living to rise in the next 12 months. Consumers are aware of the prospect of high food prices in the media, with prices for wheat and other grains soaring. Moore said there were signs that "the renewed bout of employment concerns has reverberated beyond the public sector". He added, "Stronger growth in the UK economy has done little to put a floor under the downturn in household finances. [They] continue to suffer from a backdrop of squeezed disposable income, stubbornly high inflation and ongoing public sector spending cuts." A separate survey, by the Institute for Chartered Accountancy in England and Wales (ICAEW), shows that business confidence is also still fragile. Its confidence monitor fell to +21.5 from +25.5 in the past three months. "UK businesses that came through the recession are now facing the challenge of surviving the recovery," ICAEW chief executive Michael Izza said. "They still don't know what the future holds and are uncertain about how the mood of fiscal austerity will impact the economic recovery. Government needs to deliver on its commitment to ensure Britain is open for business, while taking the tough decisions required to tackle the deficit," he commented. |
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