The UK economy: things can only get worse
Filed under: News
So just how bad will things get?
The pollAOL users were asked whether they were optimistic about the UK economy now it is officially out of recession. Some 46% said that things will simply stay as bad as they are for some time, while a shocking 39% of people said things were going to get worse before they get better.
The news last week that the longest double-dip recession since the 1950s was over brought some relief, with an unexpectedly large 1% growth in the economy. However, commentators have been quick to put this into perspective.
Azad Zangana, European Economist at Schroders, said:"It is worth bearing in mind that there are some temporary factors that have artificially boosted the latest quarterly results that will drop out of the numbers. Firstly, the London 2012 Olympic Games will have provided a boost from ticket sales, extra tourism and additional investment coming to fruition. Secondly, the reversal of the extra bank holiday effect to celebrate Her Majesty's Diamond Jubilee also fell in this quarter. Whether the better than expected numbers continue into the fourth quarter is difficult to judge."
No differenceThe factors boosting the economy have made little or no difference to most of us. Professor Philip Booth, Editorial Director at the Institute of Economic Affairs, pointed out:"The difficulties faced by the UK economy are not fully reflected in [the] growth figures. Living standards are falling, productivity growth is weak, and the economy has, in fact, been flat over the last year.
It's unsurprising, therefore, that we see no signs of things improving. In fact, as 39% of people predicted, there are some strong signs of things getting worse.
Zangana explained that a survey of manufacturers hinted at trouble in the fourth quarter, while rising food and energy prices - already signaled for the winter - could cause problems for consumer spending, adding: "This is likely to hurt retailers in the run up to the crucial festive shopping period."
Price risesEDF became the latest in a long line of energy suppliers to announce an increase in prices this month, with an astonishing 10.8% rise in 7 December. Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "This is the final hammer blow for energy bills this side of Christmas.... Some households are already performing a juggling act to balance budgets and keep their heads above water. And the added pressure of the latest round of energy rises may be the straw that breaks the camel's back."
Her figures show that the average consumer will see their bills rise from £1,258 a year to £1,334 - something that many people can ill-afford.
Andy Brown, Investment Director at Prudential's Portfolio Management Group, summed up the muted response by saying: "We're in a trendless but volatile period so celebration at this point may be an overreaction."