A new report from financial data company Markit suggests our financial outlook is at its lowest point since 2013.
Markit’s study – carried out in mid-March, polling 1,500 people between the ages of 18 and 64 – showed that the number of UK households that believe their finances will perform satisfactorily has slumped from 48.1% to 45.3%.
News of the downbeat outlook will come as little surprise, as rising inflation and a plummeting pound hitting household savings and shopping bills, while Brexit negotiations put the UK economy firmly in the spotlight.
The report comes hot on the heels of news that at 2.3%, February’s inflation hit a three-year high, which is playing havoc with import costs.
Tim Moore, an economist with Markit, touched on its effect on public perception, saying:
‘A combination of rising inflation and subdued pay trends has forced households to recalibrate their expectations for the year ahead.’
And it seems that we’re all apparently just as downbeat about interest rates, with 58% of us believing the Bank of England will raise them from their record low of just 0.25%.
Markit, which defines itself a financial information and services company, state that this is the gloomiest we’ve been about interest rates since January, when 62% expected a rise.
Image Source – By George Rex
It seems that our overall concerns are well-founded, however, as rebellion over the BoE’s historic low rate was revealed earlier in the month – at a time when the US have upped interest rates to 1.00%.
One investment analyst at private bank Brown Shipley, Jonathan Chitty, was unsurprised by the bank’s decision not to follow in the US’s footsteps:
‘Though unsurprising, the Bank of England’s decision to hold rates comes as unemployment and spending remains strong and inflation creeps higher – conditions under which central bankers would usually consider hiking rates. However, perhaps the most interesting detail of today’s decision is that support for keeping rates at historic lows is no longer unanimous, with Kristin Forbes voting for a 0.25% increase. This is the first dissenting vote in favour of rising rates for some time, and when considered alongside the more ‘hawkish’ comments in the BoE’s release it should provide some support for the pound going forward.’
What this means for UK households is that, for the foreseeable, our money just isn’t going to work as hard for us as it once did, with savers likely to be ‘disappointed’, according to senior financial analyst Laith Khalaf.
‘Cash savers are therefore likely to be disappointed if they are expecting an end to the interminable wait to get a decent return on their money any time soon. To add to this concern, the return of inflation in the UK as a result of weaker sterling and recovering commodity prices, is likely to make cash returns look even less appealing in the coming year.’
It also means our shopping is set to get more expensive, as the cost of importing sky-rockets. Sainsburys has become the latest company to admit that price rises look likely in the near-future– while Cadbury’s are using the state of the economy to shrink the size of their chocolate products. And with news like that, perhaps our grim financial outlook is entirely justified.