UK consumers ‘will have to tighten their belts’

UK consumers could be obliged to tighten their belts over the next few months as economic conditions leave many people out of pocket, according to one expert.

Howard Archer, chief UK and European economist at Global Insight, insists that relatively high interest rates and “muted” increases in real incomes around the country could lead to financial pressures for millions.

Furthermore, Mr Archer suggests that with debt management posing problems for more and more British consumers the rate of growth of the UK’s gross domestic product could begin to slow.

“The still very low savings ratio maintains our belief that the consumer will have to tighten his belt to some degree over the coming months,” he said.

“If it becomes increasingly clear that growth is being significantly hit, thereby diluting underling inflationary pressures, the Bank of England will become more inclined to trim interest rates before the end of the year.”

Five rises in the base rate of interest on just over a year have been introduced by the Bank of England, leaving borrowers facing repayment costs at a six-year high.