Economy benefiting from PPI refunds
The UK economy is receiving a welcome boost from compensation paid by banks to customers who were mis-sold payment protection insurance (PPI).
British banks have already paid out £9 billion after it came to light that they had been routinely mis-selling insurance policies designed to protect repayments on mortgage, loan and credit cards.
With payouts averaging £2,750, the compensation has helped to offset the erosion of household incomes by inflation, high unemployment, benefit cuts and pay freezes, for those who have made a genuine claim.
According to the National Institute of Economic and Social Research (NIESR), if the banks pay out £10 billion in compensation for mis-sold PPI in 2012, GDP could increase by 0.1 per cent as a result.
The Office for Budget Responsibility, which produces forecasts for the economy and public finances, estimates that income will increase by 0.5 per cent over the next two years as a result of PPI fee repayments.
However, it did not adjust the figures to account for government initiatives to boost the economy, suggesting that PPI is expected to have a greater effect.
The UK economy remains in a double-dip recession, having contracted by 0.7 per cent in the three months to the end of June.
Retailers have failed to derive the benefit they expected from the Olympics, with like-for-like sales values just 0.1 per cent higher in July, according to figures from the British Retail Consortium and KPMG.
In July last year, sales values grew 0.6 per cent on a like-for-like basis.
Stephen Robertson, Director General of the British Retail Consortium, said: “There was a boost for food retailers towards the end of the month as the sunshine came out and shoppers started getting in party food and drink ahead of the Olympics but it wasn’t a significant help.”