Critical Action is required to remedy the Situation
It is widely agreed that only a sustained period of government spending will help the UK by halting the decline by stimulating the economy. Investment in infrastructure is likely to create many jobs and that will allow spending to increase and put an end to large losses on the high street. The Chancellor is under pressure from both opposition and his own party to produce a plan that will kick start the economy before we lose even more of our industry and recovery is more difficult to achieve.
According to The National Institute of Economic and Social Research (NIESR), growth in 2013 is going to be much lower than 1% and the Chancellor is yet to dispute the figures although they fall far short of his predictions. Only a large round of public sector investment accompanied by less restricted lending in the financial sector will be able to turn the economy around according to NIESR. The approach from the Bank of England is to further reduce interest rates and allow quantitative to take place again, easing to encourage lending to the private sector and the creation of jobs.
An Efficient Economy
Many economists are less concerned about the fall back into recession than they are with the apparent lack of action from the government to rectify the situation by increasing public spending. Admittedly, spending on unsuccessful initiatives that employed many civil servants is lower, giving UK citizens, more cost efficient results from every pound of public money spent on administration of public services, but we are at the point where new initiatives are long overdue.
While an efficient economy is not to be sniffed at, the need for a vibrant economy is great and that cannot be ignored. Although the UK finds it difficult to compete with many other countries when trying to attract investment in manufacturing and heavy industry, the UK services sector is flourishing because of our high-tech infrastructure and our generally well-educated population.
Average Debt Levels
The average debt of UK households is another problem that has been slowing spending on the high street because many UK households are using credit cards, payday loans and other forms of lending on a regular basis. When credit is used to purchase goods each month, a portion of the household income will be allocated to servicing those debts each month. People have become dependent on credit to function in society, but while short-term credit is a very useful and appreciated service when needed, many people are using short-term finance regularly and this reduces their spending power in the long-term.
According to Credit Action, the money education charity, the average household in the UK has around £54k of debt including mortgages and we pay around £165m in interest on personal debt each month (Based on Nov. 12). While this is not an extraordinary figure based on the size of our economy, any reduction would free up more disposable income for people to spend or save as they please.
William Bancs is a freelance writer who enjoys following the changes in the UK economy as they unfold. He recommends that if you are struggling financially because of the state of the economy, researching QuickQuid loans may help you to improve your financial situation.