A difficult twelve months lie ahead
According to a recent report consumers in the UK have a very challenging twelve months ahead of them, and the nation has been warned to prepare itself for a drop in living standards over the coming twelve months. The warning comes from the new deputy governor of the Bank of England, Charlie Bean, who said that rising oil and fuel prices were adding to the strain that households were facing in terms of their finances.
Over recent months the financial situation for most households has become more and more strained, with rising borrowing costs, reduced access to affordable finance, increased energy bills, soaring petrol prices, rocketing food prices, and below inflation pay rises. All in all the future looks bleak for many households, with many finding it difficult or impossible to stretch the monthly budget as far as it needs to go to cover all financial commitments.
Mr Bean said that rising oil prices are likely to prolong this miserable situation, and said that the next twelve months were going to be very challenging for most households. He also urged workers not to push for higher pay rises in light of soaring inflation. Mr Bean said that the nation was facing ‘the most challenging set of circumstances since at least the early 1990s and possibly earlier, with higher inflation the result of global factors’.
Mr Bean also went on to state: ‘As a nation, it means that our living standards will be lower than they would otherwise be. Real living standards will have to grow less rapidly this year, and possibly part of next year, than was the case in the late 1990s and early 2000s. There is not very much that we can do about that as a nation unless we improve our productivity to offset it.’
To add to the bleak picture, Bean said that the rise in oil prices could continue for another couple of years, which would make the situation even worse. He went on to state: ‘Part of the reason the oil price has risen so much recently is that those extra sources of supply haven’t come on stream as rapidly as one would hope. So it is perfectly reasonable to expect that if the demand for oil continues to rise in the way that it has done over the last few years, that the oil price may continue to rise over the next year or two.’
To make matters worse another independent report from Paris has claimed that workers in Britain are set to face the weakest wage rises of any leading nation, so whilst living costs are soaring out of control pay rises are far lower than other leading nations, dealing a double whammy for households. In addition to this there is likely to be a rise in unemployment levels, with the Organisation for Economic Co- operation and Development warning that unemployment levels could rise from 1.7m this year to 1.8m in 2009.
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