U.K. Consumer Confidence Records Biggest Fall In Over A Year

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Consumer confidence in the United Kingdom recorded its biggest fall in more than a year amid concerns over tax hikes in the future, the results of a survey showed.

The Nationwide Building Society announced on Wednesday that the consumer confidence index dropped to 69 in December from 74 in November, and below economists' expectations for a score of 72. It is the biggest fall since November 2008.

More people are pessimistic about the economy, with only 34% of people expecting it to be better in six months' time, down from 41% in November. The present situation index was unchanged at 20, while the expectations index fell to 101 from 109.

Natiowide said the increase in VAT back to 17.5% this month along with other tax changes announced in the Pre-Budget report were also likely to have dampened consumer sentiment and made them reassess their expectations for the future.

"The five-point fall in confidence in December suggests that an element of caution may have begun to creep back into the minds of consumers over the Christmas period," said Martin Gahbauer, chief economist at Nationwide.

"This comes at a positive year for the index, which gained some upward momentum in 2009 to help claw its way up from the record low seen in January. The main driver behind this revival is likely to have been a renewed hope for economic situation and a belief that the worst of the recession is over.

"However, the looming VAT hike and other tax changes announced in the pre-budget report may have impacted on confidence in December, forcing people to review their expectations for the future.

"Although it is still early days, these lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn," he said.

The proportion of consumers who think the current economic situation is bad rose to 73% during December, while those who think there are not many jobs available increased to 70%.

Separately, a report from the Recruitment and Employment Confederation and KPMG showed that permanent staff placements in Britain rose at its fastest pace since June 2007 in December while temporary and contract hiring was at its strongest in two-and-a-half years.

Demand for staff among U.K. firms strengthened in December, increasing at its strongest rate in 29 months, while demand for temporary staff hit a 22-month high. Average salaries for people placed in permanent jobs increased for the second month running in December, and also at its fastest since June 2008.

"The jobs market has continued its recovery back to health and the data are certainly encouraging," said Bernard Brown, partner and head of business services at KPMG. "However, the prospect of possibly extensive public sector job cuts in the second-half of 2010 casts a long shadow over everything."

"The jobs market has been cushioned in recent years by continued public sector expansion. If this is put into reverse post-election, it could have a significant effect on employment figures," he warned.

Consumer confidence in the United Kingdom recorded its biggest fall in more than a year amid concerns over tax hikes in the future, the results of a survey showed. (Market News Provided by RTTNews)