Growing Inflation and Reduction in Consumer Spending in the UK

The continued squeeze on consumer spending power is beginning to take effect in the UK. Consumers already face rising gas and electricity bills and can expect ever even larger increases in the winter. High inflation combined with government cuts and rising unemployment have led to a large drop in Retail sales over the past 12 months.

The 20% VAT increase and rising power prices have further exacerbated the problem. Housing prices have begun to increase together with a marked increase in rents, particularly in London. It comes as little surprise therefore that the Bank of England has decided to pump more money into the system through quantitative easing. We are still some way off a recovery. Some of the Banks suggest that the market will pick up in late 2012, but they tend to provide the optimistic stance on such matters. The growing uncertainty over Europe brings a cloud over the issue. The markets are unlikely to pick up until a sensible decision is reached by the EU over how to tackle the crisis. Some tough decisions need to be made but the sooner a decision is reached the better.