Cash Flow Further Squeezed As Consumers Cut Spending
20th March 2018.
Professional bodies predict that consumers will continue to scale back their spending in the face of higher inflation and squeezed incomes.
The accountancy giant, PwC, has forecast that consumer spending growth will slow to 1.1 percent this year, down from 1.8 percent in 2017, before edging up slightly in 2019. Retailers are already reeling from the slowdown in spending since the interest-rate hike last year, and a further squeeze could not only affect our high streets but also bring our “modest” economic growth to a screeching halt. While the UK was once the fastest-growing economy, factors such as Brexit have influenced spending and forced businesses to hesitate with investment. Recent increases in interest and business rates, as well as high inflation, have all contributed to the consumer’s hesitancy to spend. Squeezed households, brought on by sluggish wage growth and price rises have created consumers who are more conscientious with their savings and less dependent on non-essential purchases.
Credit managers and high street lenders have independently helped businesses overcome the fall in spending, and the resulting dip in profits that has resulted in the so-called ‘retail apocalypse’. Business owners, particularly those with smaller companies, have struggled to interest cash-strapped consumers, merely searching for the cheapest deal. At the Credit Protection Association, we free up cash flow for our retail business members, giving them extra cash to boost their profit margins and business prospects.
Consumer spending has slowed over the past year as disposable incomes have been squeezed by rapidly rising inflation. The sharp fall in the pound after the Brexit vote pushed up the cost of imports for retailers and manufacturers.
Separate research by credit card provider Visa said that UK consumer spending had fallen for the ninth time in ten months in February, marking the weakest start to the year since 2012. Its data, compiled in partnership with IHS Markit, showed that consumer spending was 1.1 percent lower in February.
John Hawksworth, chief economist at PWC, said: “The pattern of consumer spending will continue to evolve in the longer term, with our projections suggesting that housing and utilities will continue to eat up more of household budgets, while spending on other essentials like food and clothing tends to decline.”
This is a tale that has been told time and time again as spending continues to slow, and retailers continue to struggle. Consumers are preferring cyberspace to the high streets, and budget online retailers like Asos and Amazon continue to be popular. It’s a difficult time for the retailer, and indeed any other customer-engaged sector, from hospitality to entertainment. A rough economic climate has created a difficult sales platform, with consumers too preoccupied with Brexit and household budgets to spend their money on items or excursions. This is not to say this will not change, and business owners need to come up with ways to encourage interest, even if it’s just merely offering free champagne at openings.
At the Credit Protection Association, our debt recovery services have freed up enough cash flow that our members have expanded their business, investing in new technology that has encouraged the modern consumers back to their door. On the other hand, our credit management products protect this cash flow from late payers; we will monitor customers and measure credit scores, and ensure our retail members do not follow the example set by Toys R Us and Maplin.
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
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