A week to go until the emergency Budget and consumers are battening down the hatches, putting off big projects and delaying life-changing decisions such as changing job, getting married or having a baby. The ‘deficit dread' is so severe that 1 in 3 even believe that now is a good time to emigrate!
Uncertainty over jobs, interest rates and taxes has left nearly half of consumers (45%) concerned over their finances and more than 24 million (49%) feeling worse off than ever before. This is taking its toll on lifestyle and spending with 54% of consumers cutting back on shopping and 36% delaying major projects as they hold fire for next week's emergency Budget.
Aftershocks from the recession mean that consumers are already feeling the pinch with 9 million (18%) using debt to fund their living costs and 7 million (14%) struggling to meet existing repayments. Looking ahead to the next six months, 6 million consumers (13%) say they will struggle to pay household bills on time and 4 million (8%) may have to default on credit repayments. Should interest rates climb to 2% this year, almost a quarter of consumers (22%) may not be able to meet their debt obligations. The situation is not helped by 49% of consumers experiencing a pay freeze, UK unemployment hitting its highest level since December 1994 and wide public sector job losses expected as the new Government cuts spending.
But it is not just the Government that is reining in its spending. With confidence in the economy at rock bottom and 1 in 5 (20%) concerned over their own job security, consumers too are battening down the hatches. 26 million people (54%) say that they have cut back on retail spending ahead of the emergency Budget - although 4 million (9%) are rushing through their big purchases now in case a VAT increase is on the cards next week. 5 million (10%) are reorganising their debts ahead of possible Capital Gains Tax (CGT) changes and over a third (36%) are putting off any projects that would involve increasing their borrowing, such as major home improvements. In total, 8 out of 10 are changing their behaviour ahead of the 22nd June announcement.
Ann Robinson, director of consumer policy at uSwitch.com, commented: "Consumers are fully aware that this Government's attempt to close Pandora's Box and to clean up this country's finances is going to be painful. Millions are struggling to make ends meet and in normal circumstances we would be looking to the Government to help ease the burden. Instead, it's inevitable that they will have to take more money out of our pockets.
"Consumers are working hard to stay afloat but are in for a tough time. Short-term debt solutions may be an easy way to fund the cost of living but they can lead to severe debt issues if not managed properly. Rather than continuing to plug the hole by borrowing, consumers need to work harder to strip down their essential bills to the bare minimum. This is crunch time for UK households."
