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News - 7 June 2012

Light at the end of the tunnel.

According to a special report by the ITEM Club, changes to the personal tax system and falling inflation will bolster the wallets of the average earner by £482 this year and £624 in 2013, which will feed through to a steady pick-up in spending on the UK’s high streets.

Their consumer spending report says that as long as oil prices continue to ease, inflation may well be back to 2% and combined with the increase in personal tax allowances, the take home pay of the majority of consumers will benefit.

Stronger household finances and an improving economic outlook will result in a gradual improvement in consumer spending from the middle of this year, whilst tourism from the Olympics will provide an additional boost. Spending growth is forecast at 0.8% this year and 1.1% in 2013. However, ITEM Club warns that it will be a slow recovery for the high street. Spending will be constrained by consumers paying down debt, and won’t return to pre-recession levels until 2015.

The report also adds that with consumer spending on a steady upward trajectory, audio visual goods – such as TVs, mobile phones and broadband - will continue to perform strongly, with the Recreation & Culture and Communications sectors winning the battle for the biggest share of our wallets. Rapid advancements in technology and falling prices will continue to underpin strong demand and will see both of these sectors grow by 4.2% this year.

They also predict an increase in spending in the more income elastic sectors to strengthen, such as Cars and Hotels & Restaurants, albeit slowly. Growth is forecast at 0.7% and 0.3% respectively for this year, rising to 2.6% and 1.1% by 2015.

Lavinia Newman, Founder of ABDS says:
“Consumer confidence could easily take another hit if the situation in The Eurozone worsens; conditions on the high street will remain fairly fragile until a more sustainable recovery takes hold.”

If you need any help and advice for your business contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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