Household debt has shot up at the fastest pace since the recession as cash-strapped Britons borrow to fund their spending in the run-up to Christmas, a survey indicates today.
At the same time, job security has slumped and incomes have dropped at their fastest pace in more than two years. That left five times as many households reporting finances had worsened this month than those who said they had improved, according to the Markit household finance index.
That balance was the worst for four months and is set to deteriorate further with half of households expecting their finances to worsen.
Tim Moore, senior economist at Markit, said: “December’s survey rounds off a year in which the aftershocks of the recession have hit UK household finances with unprecedented force. Weak labour market conditions, ongoing austerity measures and heightened inflationary pressures all contributed to a near-record deterioration of household finances in December.
“Things are expected to get worse before they get better, with more than twice as many households downbeat about their financial prospects for 2012 as those that foresee an improvement.”
“With real incomes down around 3% since last year, households are opting to dip into savings or take on more debt in the run-up to Christmas,” said Moore.
As jobs go in local government and elsewhere under the government’s austerity drive, job security dropped sharply among those working in the public sector. Across all sectors the drop in job security was the sharpest in eight months and particularly marked in London and Yorkshire & Humber.
The gloomy picture chimes with a Bank of England report suggesting most households have seen their incomes squeezed over the past year. In a survey, about half of households reported that they had been affected by, and had responded to, the government’s austerity drive, the Bank says in its quarterly bulletin. The Bank’s message was mirrored by today’s latest Lloyds TSB spending power report.
The data adding to the picture of an embattled British consumer comes as the Centre for Economics and Business Research predicts retailers are in for an austerity Christmas with December’s sales volumes down 1.7% when compared to November.
The research group’s chief executive, Douglas McWilliams, said: “Year on year too, December sales volumes can expect a fall of roughly 0.3% compared to December 2010. Worse still though, last December’s sales volumes were some 1.2% lower than they otherwise would have been because of the freak cold weather and despite the January 2011 VAT hike, which forced sales into December.”
A string of retailers have been suffering in the downturn and the latest figures from the Office for National Statistics, last week, showed that sales volumes were 0.4% lower in November than a month earlier. On an annual basis, volumes were 0.7% up on the same month in 2010.
However, some retailers are insistent that they are bucking the depressing trend. John Lewis, the department store, said sales in the week to Saturday rose 10.6% on the same week last year to £133.1m, which in turn was a 7.8 % increase on the previous week’s £123.5m.
The upmarket department store Selfridges also said that sales were up on the week and the year, with a particularly strong trading weekend for VAT-free purchases bought by international visitors, chiefly from the Middle East and China, which rose by more than 30%.. The low level of mortgage rates … may have helped to contain distress. New evidence suggests that forbearance by lenders may also have been important.”
*Article from guardian.co.uk*