Times change as a decade of carefree spending comes to a close

Shopaholics and bargain hunters have had a ball for the last 10years or so, mostly due to cheap credit, but alas those days are numbered and many people enter into this new year debt laden.
 
In the past, Britain has been referred to as a ‘nation of shopkeepers’, but over recent year the tables have turned changing us into a nation of shoppers, fuelled by cheap credit and booming house prices. For years we have lived to shop for whatever our hearts desire rather than what we can realistically afford, thanks to 0% credit cards and cheap personal loans.
 
However, all that is starting to change.
 
It is estimated that living costs are rising at their quickest rate in the last 10 years, causing any previously ‘spare’ money to be swallowed up covering the rising costs of mortgages, utility bills or petrol.
 
Retailers have been bracing themselves for months over the aftermath of 5 consecutive interest rate rises. Fears not unfounded when we hear Marks & Spencer announce last week that they lost more than £1.5bn in market value after Christmas sales figures showed a 2.2% drop.
 
This store group is a good measuring stick for the state of the economy since it boasts 16million shoppers a week ranging from John O’Groats to Land’s End. Marks and Spencer suffered this drop in sales despite lowering their prices by up to 6%. They cite the example that a basket of goods in 2006 would cost £100, yet in 2007 the same items would have cost the customer £94. The money the customer saved would have been sent on something else in previous years, yet now the customer is holding on to any such saving.
 
Russell Jones of RBC Capital Markets states “ The debt-to-disposable income ratio is close to a historic high, whilst the savings ratio is close to a historic low.” What we need to look at now is something to bring those figures closer together.
 
As a nation we have been spoiled by a long ‘period of economic sunshine’, however the impact this latest summer’s credit crunch has had has damped our enthusiasm to shop, in addition to lower house prices and stricter lending conditions from banks.
 
Economists believe we are reaching the end of living on the ’never-never’. Lombard Street Research (a consultancy firm) reckon that banks will continue to tighten their lending terms/conditions and even if there are 4 or 5 more interest cuts, consumer spending predictions are only 1% in 2008-the weakest year since 1992.

Yes, rather than frivolous spending and dining out regularly, Britons are more than ever very conscious of their cash and trying harder to make it last.