UK Economy Stalls, Consumer Spending Set to Slow

02 October 2008

LONDON: The UK economy's growth (now misnamed) rate fell to zero in Q2 2008, according to the Office for National Statistics. A study from the Henley Centre added to the woes, indicating that half the country's consumers plan to spend less in the next year due to anxieties about the worsening financial situation.

The economy's quarterly growth rate – down from the less than princely total of 0.3% recorded in Q1 – was at its lowest level in sixteen years, fuelling fears of a forthcoming recession.

Government statistics also showed that the UK's balance of payments deficit rose to almost £11bn ($19.6bn; €13.8bn) in the second quarter from £5.49bn in Q1.

Paul Dales, an analyst at Capital Economics, forewarns: "We continue to think that the UK economy is poised for a recession and a prolonged period of weak activity as the excesses of the last decade unwind dramatically."

The Henley Centre's Feeling the Pinch report found that 51% of UK consumers plan to cut back on shopping for pleasure, with a similar number saying they would give less to charity.

Men were said to be more concerned than women – some 20% of males are said to be “panicked” – with consumers in the west of England, Wales and Northern Ireland also more concerned than their counterparts elsewhere.

Among the study's other findings: that consumers are most likely to maintain current spending levels in those categories important to maintaining their "quality of life".

Another revelation is that those earning over £70,000 annually felt less pressurised. As the writer Edith Wharton once opined: "The only way not to think about money is to have a great deal of it."

Data sourced from Republic; additional content by WARC staff