Consumer spending growth in the UK will slow to just 0.5 per cent next year as households face high energy and food prices and falling property values.
Discretionary household spending is being squeezed by rising costs of bills such as utilities, food, rent and debt servicing, according to PricewaterhouseCoopers’ UK Economic Outlook survey.
The report estimates that total debt service costs on all forms of household debt rose to record levels of just under 20 per cent of household disposable income last year.
PwC expects the high debt service burden to be sustained for “some time” and will “provide a persistent drag on consumer spending growth in the medium term”.
PricewaterhouseCoopers head of macroeconomics John Hawksworth said: “The outlook for household spending growth in the UK is looking more subdued now than at any time since the early 1990s.”
PwC said it expects economic growth to slow from 3.1 per cent last year to 1.75 per cent this year and about 1.25 per cent in 2009. The report estimates that the chance of the UK economy falling into recession has risen to about 30 per cent in recent months.
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