UK Consumers Slash Spending in Face of Recession Threat

08 September 2008

LONDON: After riding the crest of a property-price-fuelled easy credit wave, when spend, borrow, spend was the nation's mantra, UK consumers now find themselves in stormy waters.

Rising food and energy prices and falling property values have forced British households to tighten their belts – exacerbated by chancellor Alistair Darling's depressing (and unhelpful) warning that the UK faces "arguably the worst" economic downturn in 60 years.

His alert is reinforced by the Organisation for Economic Cooperation and Development which believes the UK will be in recession - two successive months of zero GDP growth - before the year's end.

The latest figures from across the consumer spectrum reveal house prices slid 12.7% in August, the biggest decline since mortgage lender Halifax  began recording such data.

New car sales last month plunged to their lowest levels since 1966, with luxury marques such as BMW and Land Rover taking the biggest hits, reports the Society of Motor Manufacturers and Traders.

Food prices have risen steeply– by 8.3% since January according to a BBC survey. As a result, the Sainsbury's supermarket chain reports a 6% increase in sales of its cheaper own-brand goods.

Discount grocery stores are also benefiting from the squeeze, with Aldi revealing sales up by nearly 20% in the twelve weeks to mid-August, while rival Lidl has enjoyed a 12.3% increase.

The country's workforce is putting less money into retirement plans and household savings are also under intense pressure.

Consumers saved or invested just just 1.1% of their incomes compared with 2.1% last year and 10.7% in 1993.

The government, led by an increasingly beleaguered Gordon Brown, is casting about for ways to improve the electorate's fortunes (and save its own political skin).

Last week saw the introduction of measures to help first-time homebuyers acquire a mortgages, while the Bank of England decided to keep interest rates on hold at 5%.

Data sourced from; additional content by WARC staff