Credit squeeze expected to continue into 2009

If the latest report from the Confederation of British Industry (CBI) is anything to go by, the current financial turmoil is expected to spread well into next year.

An increase in household costs including mortgage repayments and utility bills are to blame for the continued slump in the UK’s economic growth.

Richard Lambert of the CBI said the credit crisis appears to be taking its toll, as demand for commodities falls. Having enjoyed 2 years of strong growth, we are now living in uncertain times. We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth.

The latest forecast follows the Conservatives release of the ‘Cost of Living Under Labour’ report, which explains to what extent costs have risen in the last decade. Consequently, the report highlights the recent price increases and the general rise in living costs, as a result of the current credit crisis.

The report shows a 10% increase in utility bills, a rise in food costs including the price of a loaf of bread today costing 28% more, since Gordon Brown became Prime Minister.

The CBI’s Chief Economic Adviser, Ian McCafferty, said the UK economy is being buffeted by some strong headwinds, with the prolonged troubles in the financial markets making for a bumpier ride both this year and next.

High commodity prices are adding to inflationary pressures and significantly squeezing household incomes. Some households are feeling the pinch with lending conditions becoming tighter, concluded Mr McCafferty.

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