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Office of National Statistics Figures Make a Bleak Midwinter

Information issued by the Office of National Statistics (ONS) has revealed that Christmas trading was weaker than expected and borrowing has risen to show the widest deficit since records began 10 years ago.

Their Expenditure and Food Survey has also found that the share of the typical weekly household income spent on “housing-related costs” has increased 1 per cent between 2004/5 and 2006. Of the average £456-a-week being spent per household, 22 per cent is now spent on mortgages, rent, and home improvements.

Despite consumers seeming to spend more carefully over Christmas, possibly due to tougher terms and conditions being placed on loans and mortgages by banks and building societies, the rate of increasing debt slowed and sales dropped by 0.4 per cent last month compared to November. Although the economy could do with consumers trying to clear debt, these findings will further fuel calls for the Bank of England to make another cut in interest rates.

According to the ONS, shops such as department stores experienced their worst December for 13 years – definitely unlucky for some. Marks & Spencer saw that trading conditions were tough and, like many other retailers, tried to use discounts to lure more shoppers yet their sales were still 2.2 per cent less in the final three months of the 2007.

The gap between debt and income was also reflected in the highest budget deficit since records began to be monitored 10 years ago. Consumer borrowing reached £43.6 billion for the year by the end of 2007 compared to £32.2 billion for the previous 12 months. This means that levels will be higher than the Treasury had aimed for in 2008.

Less spending will lead to less growth in the UK economy leading to fears that debtors with poor credit might find it harder to get credit. Providing those in the red move fast enough to get advice before money matters get any tougher in 2008 it should not be too difficult to find debt management companies, remortgage, or get a cheap secured personal loan.

news posted on 28 January 2008

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