By Max Clarke
In many respects, the UK’s economic recovery appears underway. The last month has seen a near levelling off of previously runaway inflation figures; a slight dip in unemployment; positive quarterly GDP growth; as well as slight gains in the retail sector; while the manufacturing sector continues to perform strongly, leading the GDP growth.
Positive though this news may be, obstacles to a more accelerated recovery remain. Chief amongst these is the dangerously low consumer confidence of UK households.
Depressed by what the BBC’s business editor Robert Peston calls ‘the quintuple whammy’, disposable incomes in the UK remain squeezed.
Says Peston: The quintuple whammy, so to speak, is of sterling oil and fuel prices at record levels, cotton prices that have surged, food prices that are rising, VAT that has already gone up and interest rates that are expected to rise this year.
Should this reluctance of the UK consumer to spend fail to increase, the prospects of a consumer led recovery remain remote. The effects of this can be seen in the UK’s high streets, where just last month the retail sector posted its worst quarterly performance in over 15 years.
“Mounting fuel and utility costs, falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to,” commented Stephen Robertson, director general of the British Retail Consortium.
So although positive indicators can be seen in the nation’s economy, consumer confidence- itself a manifestation of constrained household disposable income- will likely worsen as public sector cuts and further government austerity measures take effect. Until the British consumer has the income and the confidence to spend their money, the recovery will remain sluggish.