The UK consumption

Nowadays, the consumption in the UK is decreasing and it is mainly due to the current financial crisis and the inflation. Which impact do these two factors have on the consumption ?

Even if the latest figure of the Retail Price Index shows a drop in inflation (due to a decrease in oil price) and goes from 5.00% in september to 4.2% in october, inflation remains high and the people expenses keep slowing down! Moreover, the financial crisis has put the consumers in a state of uncertainty concerning the future which will lead to an increase in people savings. Thus, inflation combined with credit crunch are stopping the consumption.





Marks & Spencer, one of leader in the UK retail market, is today feeling the effect of the current unfortunate events. The following figures show the sales evolution of the brand between september 2008 and october 2008:


•UK sales: -1.6%:
•General Merchandise: -2.9%
•Clothing: -3.5%
•Home: +2.9%
•Food: -0.5%

The CEO of the company announced a drop in profit for 2008 (2008 half year profit £300million against £452million in 2007) What are the measures taken by the government to stop these collapses of major retailers?

One of the solution brought was to cut the interest rates (which, according to Mervyn Allister King, are expected to reach 1% by the end of december 2008) we should then assist in a future state of deflation which will permit to relaunch the consumption and then the economy.

However, we don't know yet when the recession will be over, and we can ask ourselves if the cut in interest rates will be enough to relaunch the economy?!