UK confidence grows despite pay pressures

CONFIDENCE in the British economy is still on the rise despite the ongoing squeeze on pay, according to two surveys of thousands of UK consumers.

Both Lloyds’ and Deloitte’s most recent analyses of consumer confidence found the strongest sentiment since their surveys began, in 2010 and 2011 respectively.

Both reports demonstrate growing confidence in the housing market, with an increasing number of people expecting that prices will rise, and more positive outlook for the future.

However, real incomes are still falling, and Lloyds’ report reveals ongoing concerns about utility bills: gas and electricity prices remain a worry for over three quarters of people responding to the survey.

Despite a general improvement in the outlook for the economy, nearly half of those surveyed by the bank are still reporting poor personal finances, with 46 per cent saying their situation is not good.

Deloitte’s chief economist Ian Stewart agreed.

“The central problem for UK consumers remains, as it has for the last three years, declining spending power. After taking out inflation and tax changes, earnings have fallen by about 1.5 per cent in the last year. This actually represents an improvement compared to the fierce income squeeze of 2010 and 2011, but it leaves consumer spending power on a declining path,” he said

“The key to a sustainable recovery in consumer activity is falling inflation and a pickup in earnings.”

Deloitte reports that 11 per cent of people said someone in their household started a new job in the past quarter, in comparison to seven per cent in the same months last year.

Lloyds also suggests more optimistic perceptions of the labour market. While views of the situation for jobseekers are still negative, with 78 per cent saying the market is not good, the number has fallen from 81 per cent in August.