UK economic output declined by 1.9%, during the first quarter of this year, according to figures released by the ONS (Office of national Statistics). This was largely down to a sharp reduction in spending, by UK households, as people are tightening their belts in an effort to get out of debt, or simply to make ends meet.
In the first three months of this year, spending was down by 1.2%, which is the biggest drop for nearly 30 years. The decline in production output, which was at first thought to be 6.2%, was less than expected at 5.5%.
According to debt advice specialists, many UK consumers have become overcommitted with loans, store cards and credit card debt as well as having to deal with household bills. They are beginning to crack under the strain, and are more concerned with finding a solution to their financial woes than they are of spending more money. Popular forms of debt relief include debt management plans and IVA’s.
There is one part of the economy that is showing a growth in spending, and that is government expenditure. This is a deliberate policy, by the government, to lesson the effects of the current economic downturn and hopefully shorten the duration of the recession.
There were also falls in the service sector, of 1.2% and construction industry output declined by 2.4%. Overall, the UK economy has shrunk my more than 4% since this time last year.
The ONS figures also confirmed that the current economic situation was having a downward effect on wages, where salaries declined by just over 1% in the first three months of 2009, which is the largest fall since records began.