LONDON (MNI) – Household disposable income has fallen and almost
70% of households expect to be hit by the fiscal squeeze, an annual
survey for the Bank of England shows.

The survey highlights the pressure UK consumers’ finances have been
under and they are skeptical that things will get easier, at least in
the near term. It raises concerns about the strength of consumer
spending in 2012.

The survey asked respondents how much disposable income they had
left over after paying taxes, utility bills, housing costs and loan
repayments. It found the average level was Stg720 per month, down Stg46
over the past year, according to respondents. This decline in disposable
income continued the trend in the past four annual surveys.

“Looking ahead, households were uncertain about future incomes and
expected to continue to be influenced by the fiscal tightening,” the BOE
economists who analysed the report say in a report.

The fiscal squeeze is fueling consumers’ concerns over their
finances. In all, 48% said it had impacted on them in the past year and
69% expected it to impact in future, whether through higher taxes, lower
incomes or lower benefits.

There was, however, a fall in the proportion of public sector
workers concerned about losing their jobs. Around one-in-three working
households reliant on public sector income said they were concerned
about job losses, down from one-in-two in the 2010 survey.

Just under one-in-four respondents (24%) said they would save more
in response to the fiscal squeeze, with 22% saying they would work
longer hours and 23% saying they would look for a new job.

With employment growth slowing, and the BOE expecting the economy
to flatline in the next couple of quarters, at an aggregate level it is
unclear how people can find better paid work or why more hours work
would be required.

The survey found some improvement in credit availability for those
high loan-to-value ratio mortgages but the “overall level of households
reporting credit constraints remains elevated compared to the period
before the onset of the financial crisis,” the report said.

In all 12% of UK households say they had struggled to pay for their
accommodation in the past 12 months, with mortgagors faring better than
those renting or who own their properties outright. This reflected the
impact of falling interest rates, the report said.

The pressure UK households have been under has been a key factor in
the weakness of the economic recovery.

“Over the past year the recovery in the UK economy appears to have
slowed. That weakness in UK demand has been driven by falling
consumption, reflecting the challenging environment facing households,”
the report says.

The household survey was conducted between Sep 23 and 29 by NMG
Financial Services Consulting for the central bank.

–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com

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