Debt Continues to Cripple Families as Rate of Inflation far Outruns Average Wage IncreaseBy Www.payplan.com, PRNE
Sunday, July 31, 2011
GRANTHAM, England, August 1, 2011 -
Financial information company Markit has published figures that show how cash-strapped UK residents are resorting to using credit cards to pay their utility bills.
The Markit financial index shows that 36 per cent of householders have seen their financial position worsen since May, as wages in Britain fail to keep up with the rate of inflation. While the index does report a financial improvement for six per cent of households, the overall financial index has fallen to just 35.1 per cent - the lowest level since 2009.
The company’s senior economist, Tim Moore, strongly believes that this latest index “pours cold water on the tentative signs of improvement seen last month.”
He said: “The grim figures show household finances deteriorating at the fastest pace since early 2009, with people eroding their savings and taking on more debt to finance strong rises in living costs, as income from employment continued to fall in June.”
While the index did note that household spending was up for this month for high- and middle-income households, it also highlighted that: “Higher spending, at least in part, reflected higher consumer prices and was against a backdrop of lower savings and reduced income from employment. Three times as many households (30 per cent) noted a drop in savings as those that indicated a rise.”
According to the Office for National Statistics (ONS), the level of average pay in the UK was rising by a rate of just 1.8% a year in April, lagging severely behind an inflation rate (as measured by Markit’s index) of 4.5%.
Reflecting the index’s findings, the Office for Budgetary Responsibility (OBR) predicts that UK householders will borrow £500 billion over the next four years in order to maintain current living standards, equating to an average UK household debt of £20,000.
Similarly, information gathered by debt consolidation experts at Payplan has found that while the average debt of its customers has fallen by 18.904 per cent since 2009, it still stands at a staggering £26,750.41 - an average level of debt that will only increase (and, in some cases, lead to bankruptcy) if wages don’t begin to catch up with the soaring rate of inflation.
Consumer spending accounts for almost 65 per cent of the UK’s GDP, and the similarity of Markit’s results and the predictions made by the likes of the OBR, the ONS and Payplan have only increased fears that the UK will suffer a double recession as consumers are expected to greatly restrict all expenditure on non-essentials for the remainder of this year.
Paul McNulty, +44(0)1476-539-200 x 3068, paul.mcnulty at payplan.com
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