Households reign in spending  amid fears of mass job cuts

Nervous British families are reining in spending as fears grow about mass job losses, a survey shows.

Households have become gloomier about their finances this month and are ‘highly pessimistic’ about their prospects over the next year, according to information provider IHS Markit.

This coincided with people feeling less secure in their jobs and receiving lower incomes, prompting a rising number to take out credit facilities such as overdrafts and credit cards.

Lewis Cooper, an IHS economist, said the latest data highlighted the ‘continued strain’ on family finances during the coronavirus pandemic.

‘Overall, the data hints at some worrying trends when put in the context of the significant recession facing the UK,’ he said.

‘Although lockdown measures are looser, households are spending less, earning less and unsure about their jobs, all of which has the ability to add severe friction to the pace of the economic recovery.’

Figures also underlined the scale of the economic woes facing the UK, after GDP plunged by 20 per cent in the second quarter.

That is the biggest drop so far experienced by any member of the G7 of developed nations.

Japan – which did not lock down its economy – yesterday reported a decline of 7.8 per cent between April and June. 

France has reported a second-quarter drop in GDP of 13.8 per cent, while Italy’s fell 12.4 per cent, Germany’s by 10.1 per cent and the US’ by 9.5 per cent.

Canada is due to report its figures next week, although it is expected to post a fall of around 12 per cent.

In Britain, IHS said an index measure of households’ perception of their own finances dipped from 41.5 to 40.8p from July to August.

Any figure below 50 indicates an expectation that conditions will get worse.

The index of households’ perception of their future finances also remained firmly below the 50 mark, ‘signalling that UK households anticipate their finances will have worsened by August 2021’.

Separate figures also revealed that visitors to high streets fell 0.5 per cent last week compared to the previous one, as sweltering temperatures deterred shoppers.

However, many were instead tempted by air-conditioned shopping centres, which saw a 2.4 per cent rise in footfall, according to data firm Springboard.

However, despite pessimistic predictions, the Bank Of England’s chief economist, Andy Haldane, told the Daily Mail last week that Britain was on course for a ‘rapid’ recovery and may well have clawed back half its losses from the coronavirus crisis.

Writing in the Mail, the 52-year-old economist said a recovery in jobs would take longer, but insisted the risks to jobs was receding as spending and business confidence picked up.