What does 2008 hold for British consumers?

By MoneyhighStreet Staff. Published on January 11, 2008 This post currently has no comments.

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While it is difficult to accurately predict where the British economy will go in the coming year, the early indications aren't encouraging. A cloud of uncertainty is hanging over the housing market here, while some commentators are saying that the United States has already entered a recession. In this article we take a look at the financial outlook for 2008.

House prices will be one of the biggest concerns for British homeowners this year. With some analysts predicting a slide of up to 10%, the outlook is far from positive. However, it is not all doom and gloom as many analysts feel prices will remain steady with some even predicting a slight rise. Halifax's house price index revealed that the average price of property increased by 1.3% in the last month of 2007, after three previous months of falls.

Economic uncertainty is also taking its toll on retailers. Christmas spending on Britain's high streets was slow in December with Marks & Spencer reporting a 2.2% dip in sales for the fourth quarter of 2007 compared to a year earlier. Consumer spending is expected to remain slow in 2008 amid the uncertain economic outlook.

This situation is exacerbated by the fact that prices across the board are on the up. Oil prices have hit new record highs in recent weeks and home energy costs are set to increase significantly. NPower has already increased its prices by about 15% and its competitors are expected to follow suit. However, despite the lack of price transparency in the industry it is still possible to save money on energy bills.

“Gas and electricity providers are failing to inform customers of their cheaper tariffs, causing 63% of people to languish on more expensive products. With energy prices likely to increase by 15 to 20% in 2008, it is more important than ever that suppliers be compelled to improve this communication to customers,” says Paul Schofield of moneysupermarket.com.

The UK stock markets experienced a volatile last six months of 2007 after a positive first six months of the year. The FTSE100 started the year at just above 6,200, and had risen to over 6,600 by the middle of the year.

However, the global credit crunch and the Northern Rock crisis changed all of that. By the end of the year the FTSE100 was down to around the 6,300 mark. The banks were hit hardest, while building stocks also suffered. While some stocks, such as Vodafone, have been going strongly the stock markets remain a risky place to invest money in 2008.

Although these are undoubtedly tough times, the good news is that the British economy was in a very healthy position before the credit crunch reached these shores. And even if the United States goes into recession, Britain is unlikely to follow as the jobs outlook remains healthy and business confidence is reasonably high.

The Bank of England left its base interest rate unchanged at 5.5% this week after cutting it by quarter of a point late last year. However, any signs of a slowdown in the economy or a significant fall in house prices could prompt further cuts this year. In fact, many analysts predict that the base rate will be down to 5% by the end of 2008.

The full effects of the global credit crunch have not become clear so we are likely to see a 'wait and see' approach form the government and economists this year. For consumers, caution will also the best tactic in 2008.

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