UK consumers blame the government and banks for the economic downturn

According to the results of a survey conducted by independent market analyst Datamonitor, as part of its “Recession & Recovery Research Programme”, 83% of the UK population blame the banking industry for the credit crunch and the economic downturn.

Whilst that number may not be surprising in itself given the media opprobrium that the financial services industry has been subjected to in recent months, what is more worrying for the incumbent Labour government is the fact that almost as many respondents (82%) put equal blame on the government and regulators such as the Bank of England and the Financial Services Authority for the economic downturn. Indeed, 64% of respondents felt the fundamental lack of regulation was in fact symptomatic of political greed – and therefore part of a wider “feather your own nest” culture in British politics – implying political decisions were made for personal benefit and not for the greater good of the population.

There is no doubt that this latter finding may be skewed by the ongoing investigation into the abuse of MP expenses. However, whoever does win the next election will have a tough economic path to follow.

“There is already a good deal of debate over the veracity of the Treasury’s macro-economic forecasts and the implied debt position that these assume, says Neil Hendry, Global Director of Consulting for Consumer & Financial Services at Datamonitor. “It will not take too much of a downside impact to drive government debt levels over 100% of GDP. Therefore, whoever wins the next election has to deal with the fundamental fact that the UK consumer remains downbeat about the economy and their personal financial positions.”

The much awaited and anticipated boost in consumer spending would appear to be someway off:
Datamonitor’s Recession & Recovery Research Programme givesan up-to-date view on the effects of the economic downturn on consumers and business across 19 countries. Currently in the UK, 58% of respondents claim to be financially worse off as a result of the recession - 23% blame this decline directly on a loss of income from employment. With 42% of respondents in employment still claiming to be worried about their job security, the much awaited and anticipated boost in consumer spending would appear to be someway off, particularly as 77% of the population believe that, even though the worst of the mass redundancies may be over, labour market conditions are still dire and show little sign of improving.

It has been stated many times by economists during this recession that unemployment is a lagging indicator – but with 600,000 students entering the labour market in July at the end of the university year, and jobless numbers expected to rise by 250,000 in that month alone, David Blanchflower of the Bank of England’s Monetary Policy Committee’s prediction this week that he expects to see 100,000 people on average joining the jobless queues each month up to the end of 2010, there is the very ominous spectre of 4,000,000 being out of work soon after the next government takes office. So, whether unemployment lags or not the “triple whammy” of increased social welfare expenditure, reduced income tax receipts and depressed VAT receipts will be a very real challenge for the Chancellor of the Exchequer.

Hendry concludes:
“They say a week is a long time in politics – it therefore remains to be seen where British political sentiment and blame will lie for the economic situation if the next government can not create sustainable employment and with it consumer confidence in a very short space of time.”