THE CHANCELLOR is planning more action to pump cheap funds to banks in a new drive to get the economy moving, as four new reports show consumers feeling the economic pinch.
Britain remains dangerously close to a triple dip recession, with data this week expected to show no or very weak growth in the first three months of the year, leading George Osborne to consider extending his Funding for Lending Scheme (FLS) for another year.
The gloomy reports include:
■ Markit’s household finance index dipping to 37.7 in April, down from 39.3 in March and further below the 50 level which indicates no change in finances on the month. Falling real incomes are the key problem, the study found.
■ An Ipsos Mori poll showing just 12 per cent of Britons feel the economic situation is “good,” down from 16 per cent a month ago.
■ Figures from Barclaycard which show consumer spending was down 4.8 per cent in April compared with the same month last year. Clothing sales fell 17.6 per cent as the cold weather delayed spending on seasonal attire.
■ Deloitte’s latest consumer tracker showing households are still worried about debt levels and levels of disposable income despite some improvements in sentiment.
GDP contracted 0.3 per cent in the final quarter of 2012 and a further fall at the start of 2013 would drag the economy officially back into recession territory.
“We estimate that the currently available data point to a modest 0.1 per cent expansion at best, after GDP fell 0.3 per cent in the fourth quarter of last year, although a further decline would not be a surprise,” said economist Chris Williamson from Markit.
“The detrimental impact of the news of a return to recession on confidence would add to pressure on the Bank of England to take further action to revitalise the economy.”
If the figure is negative it will represent a double blow to the chancellor, coming just days after the UK’s credit rating was downgraded from triple-A to double-A plus by leading agency Fitch on Friday.
The ratings agency believes a combination of low growth and sustained high borrowing will push the UK’s debt to above 100 per cent of GDP.