Government under pressure on economy as British households anticipate worsening finances
The government is facing mounting calls to boost economic momentum amid concerns that companies may lay off workers and increase prices, with millions of households anticipating a decline in their financial situation this year.
Prior to a key speech by Finance Minister Rachel Reeves this week, which will reaffirm the Labour Party's commitment to boosting the economy, the Confederation of British Industry has stated that private sector companies are currently reviewing their budgets to mitigate the effects of budget measures announced in October.
The pressure group forecasts a substantial drop in business activity over the next three months. This decline has been going on for several months, prevailing even since mid-2022, when Liz Truss served briefly as Prime Minister.
Alpesh Paleja, interim deputy chief economist at the CBI, stated: "Followiing a dismal run-up to Christmas, the start of the new year has failed to bring a fresh boost, with companies still anticipating a considerable decline in activity."
It is imperative to regain momentum for the economy. The government could work towards giving the UK's economic story a more deliberate boost by concentrating on initiatives that foster expansion.
Business leaders have stated that they will have to take action following the chancellor's autumn budget, which comprises a £25bn increase in employer national insurance contributions and a 6.7% rise in the minimum wage.
Even as businesses are reducing staffing and the economy is experiencing a stall, financial markets anticipate the Monetary Policy Committee at Threadneedle Street to lower interest rates by 0.25 percentage points to 4.5% at its next meeting on 6 February, with just one further reduction by the end of the year.
Twenty-one million people are anticipating a financial blow.
According to a recent survey of over 2,000 adults in Great Britain, 41% - equivalent to 21.3 million people - fear that their financial circumstances will deteriorate over the coming year. This pessimism is largely due to the pressures of paying living costs and rising energy bills.
Vikki Brownridge, chief executive of StepChange, notes: 'There is a prevailing sense of financial unease affecting millions across the UK. The strain of living costs, particularly the ongoing burden of expensive energy bills, is taking its toll on families, individuals, and local communities, with women and individuals with parenting responsibilities feeling the impact disproportionately.
What's causing concern is that more people than ever are feeling anxious about their financial situation ahead of 2025, even more so than at the same time last year. These challenges aren't short-term difficulties. They indicate the long-term financial stress many people are under, and if they don't receive the right help, things will only become more difficult for them to manage their finances.
The government is facing mounting pressure to provide support for businesses and households after economic growth effectively came to a standstill during the second half of 2024, with inflation climbing once more above the Bank of England's 2% target in recent months.
According to EY-Parthenon, one in every five companies listed on the UK market issued profit warnings last year. This surpassed 2020 levels at the peak of the Covid-19 pandemic, only behind those given in 2001, following the burst of the dotcom bubble and the 9/11 attacks.
According to a report published on Monday, 274 UK-listed companies issued profit warnings last year, found Jo Robinson, a partner at EY-Parthenon, with cancelled or delayed orders and rising costs being the most prevalent reasons.
Highlighting the increase in employers' NICs and the rise in the minimum wage, she said: "Regardless of the situation, the road ahead looks particularly tough, with obstacles surrounding trade, global politics, interest rates and other factors."
Post a Comment for "Government under pressure on economy as British households anticipate worsening finances"