The ‘Rolls Royce of retailers’, John Lewis, reported a recent sales decline of 2.2% on last year. This figure would be made worse if you lined up the increase in VAT.
All sorts of excuses can be made about snowfall, holiday periods and the wrong sort of leaves on the track but undoubtedly the UK economy is beginning to see signs of a major fall in consumer spending. This is due to two main factors: firstly, the government has only experienced interest rate reductions and corresponding mortgage payment reductions in the depression so far. Understandably, they have joined the rest of us in watching what we spend and reducing debt. The second reason is due to rising VAT, which for most people at 20% is a psychological and financial problem.
However, the government strategy is absolutely correct; severe cost reductions have to be made to bring the UK economy back in line.
Entrepreneurs are the key to increasing consumer confidence and regenerating the economy as well as employing workers displaced from the public sector. The government is definitely not helping this because the catalyst of entrepreneurial growth is access to the capital and in particular banking markets. Banks are still not lending and when they do the hurdle rates are too high for entrepreneurs to accept. The government owns 84% of the Bank of Scotland and a controlling interest in Lloyds, and rather than concentrating on bonus payments to bankers they should be setting lending targets to banks. Without this cash flow the UK economy (already under great pressure) is doomed.
Economic News | Consumers, Entrepreneurship, UK Economy