Blog: Back from the brink or ideological zeal?

Chris Mercer | 20 October 2010


The UK coalition government has unveiled what are rapidly becoming known as the biggest spending cuts since the Second World War.

In a nutshell, consumers are going to have less money in their pockets and the private sector may need to pick up the slack of up to 500,000 public sector jobs over the next four years.

The UK's Department for the Enviornment, Food and Rural Affairs is said to be ready to cut to 5,000 to 8,000 jobs. (Here in a slightly opaque table is a breakdown of some of Defra's spending cuts).

There has been much talk of the age of austerity, but, finally, the time is upon us.

For food companies, as for many FMCG firms and retailers, the next 12 months will be a nervous time in the UK. There is a notion that employment held up better-than-expected during the official recession, but greater job losses look likely to be an early by-product of the Government's drive to reduce the country's deficit.

Official data suggests that consumers are, if not already feeling the pinch, braced for the worst. 

The latest data from the country's second-largest supermarket chain, Asda, indicates that household spending power has fallen in every month this year. The September edition of the firm's Income Tracker, released today (20 October), shows that the average UK family had GBP4 less to spend per week than in September 2009.

"The rise in VAT to 20% in January 2011 will further squeeze household spending power over the next few months," said Charles Davis, the economist at Cebr who compiles the monthly income report for Asda.

Then, of course, we have the looming spectre of a possible second recession - the fabled double-dip. That's not a scenario anyone over here wants to contemplate."



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