Economy: Recession Feared Over Squeezed Consumers

Retailers hit hard as consumer budgets are squeezed

Retailers hit hard as consumer budgets are squeezed

A recent warning from the British Chambers of Commerce (BCC) says that the Bank of England’s latest quantitative easing measures may not be enough to keep the UK out of another recession. The BCC represents companies that employ one in six British workers.

The warning comes as consumers are facing the worst income drop in over 30 years. Already consumers are feeling the squeezes to their budgets from retail price hikes, higher taxes and slow pay increases.

Avoiding Recession

The BCC estimates that the economy grew between 0.1% to 0.3% in the third quarter, and warns that the recession risks come from eurozone crisis fears and a sharp fall in exports due to a lack of global demand.

“We can avoid a recession, but this relies on the government making some tough policy choices,” said John Longworth of the BBC. He stressed the risks facing the economy and the urgency for the government to intervene without delay.

Other predictions from the National Institute of Economic and Social Research  (NIESR) were more favourable, saying that the economy grew by as much as 0.5% in the third quarter. However, NIESR does not suggest a booming recovery, saying that the recovery from the 2009 recession is the weakest since the first World War.

“Other data published today similarly shows that the economy is recovering but that the financial turbulence in the euro zone and the weaker outlook for global growth will mean that the recovery will be choppy,” said the NIESR.

Chain of events

Despite the base interest rate being kept at a low 0.5% to spur borrowing, the economy has been nearly stagnant for a year. Consumers, finding their budgets hit by the economic situation, are cutting spending on unnecessary things.

This in turn affects retailers, continuing the economic stagnation.

Experts say that for the first time, even the amount of money spent on food is decreasing because squeezed consumers are being forced to cut corners even in their grocery budget.

The Institute for Fiscal Studies released a report on Tuesday predicting that income is expected to fall 7% in Britain, pushing 600,000 more children into poverty.

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