Words About Things

Last September I wrote a post about a survey which showed that 40 percent of Britons felt that they were unable to save money due to the tough economic climate. This statistic was shocking but not unfounded, unemployment was at almost 2.5 million and the recession was hitting hard. At the time 1 in 4 people surveyed had no savings at all which left them in a very precarious state financially. Others had savings already but were unable to increase them despite the looming threat of unemployment.

Although we are now out of the Recession things are recovering very slowly and many are still struggling. Consumer confidence remains low and a ‘double dip’ recession is a strong possibility. Whilst this all seems very negative it’s not all bad news. A survey completed in July shows that we are in a slightly more positive position this year: savings accounts balances at a major high street bank actually increased by £1.4 billion in the first five months of 2010.

Some people are still unable to move money from their current account to a savings account. 62 percent of those asked said that they were saving ‘much less than they should be’ and 22 percent were not currently saving at all. The reduction in personal saving is mirrored by the reduction in consumer spending, both show that lack of consumer confidence is having a negative effect on the economy. The Bank of England will publish their August Inflation Report on Wednesday and it is expected to predict a 2 percent growth in inflation next year. This is much less than previously predicted, the outlook as been revised to to continuing economic problems.

I’m no economist but it seems to me that what we need right now is some good news. A little growth in the economy would lead to increased borrowing and spending. In turn this would lead to more growth and increased job security for those reliant on consumer spending. All it would take is for some positivity to spread and not be destroyed by another wave of bad news. I’m feeling helpful so i’ll get us started: I just found £2.50 in change down the back of the sofa…

Everyone knows that Christmas is a very important time in retail especially after a difficult year.  This Christmas may be make or break for several retailers who have struggled during the recession. Many are hoping that increased consumer confidence will result in a bigger spend this year than in 2008 when £43.9bn was spent.

Unlike last year retailers are feeling ‘cautiously optimistic’ that this Christmas will bolster their profits. Marks and Spencer have reported better than predicted profits over the last 6 months. They saw improvements in clothing and food sales are are hoping for good sales of historically popular items such as Christmas hampers and other gifts.

“We have had a good start to the third quarter. The market remains competitive and we remain cautious about the outlook for Christmas and the year ahead.” – Executive Chairman Stuart Rose

Online retailers have recently been hit by the Royal Mail strike with 2/3 reporting a 30% fall in revenue despite most offering alternate delivery methods. Two thirds of E-tailers are considering giving up on the Royal Mail for good after the strike has ended. Considering that other delivery companies seem to be more reliable and just as efficient this isn’t a surprise. This could be the beginning of the end for the Royal Mail.

Retailers are concerned about the possibility of a frugal Christmas despite signs of stabalisation on the high street. Some companies reported rises in sales in September after four months of reduced spending. There is still concern however that some stores will be forced to close for good if they do not do well over the holiday period.

The golden quarter has the ability to make or break. The first quarter of next year will see further distress in the retail sector. I think there will be a few [retailers] coming down with the Christmas decorations.

Retail specialist Robin Knight

A recent survey of consumers found that most intended to spend 15% less than last year on Christmas presents. They expect to spend around £267 on presents and £28 on decorations. Food and drink remains a priority however with an average spend of £182.

One of the most well know names on the high street Marks & Spencer have reported an improvement in sales with the three months to September 2009 only seeing a 0.5 percent drop like-for-like sales from last year. Christmas is a very important time for M&S and a good Christmas would help them to end 2009 on a positive note. Last year they used unprecedented sales to try and lure in hesitant shoppers towards the end of November. They are hoping that their Christmas hampers and other gifts will boost this year’s earnings.

A recent survey has shown that almost half of Britons are unable to save. Only 60 percent of those asked managed to put money into their savings account each month, saving on average £206. Back in January 34% said that they were unable to save. Of those who were able to top up their savings 65% used instant access savings accounts.

Another survey back in July found that a quarter of people had no savings put aside at all. With unemployment still rising those who are not saving must be concerned about what will happen if the are made redundant. We are lucky enough in this country to have support systems in place for those out of work but it is still not a good time to be job hunting.

Those unable to save should console themselves with the fact that ISA interest rates have hit an all time low. Its great to have saving to fall back on but those savings wont be growing by much until the economy recovers.