Bank of England’s recession warning hits UK consumer confidence

Fears of a protracted recession as long as the one caused by the financial crisis is weighing on Brits’ optimism, a new survey released today showed.

Consumer confidence dipped four points at the beginning of August, according to Bank of America.

“Confidence remains weak, consistent with recession, and all components worsened,” the Wall Street giant said.

The drop was driven by the Bank of England earlier this month publishing a fresh set of forecasts that warned Britain is headed for a 15-month low recession, beginning in the final months of this year.

Andrew Bailey and the rest of the monetary policy committee said consumers will cut spending in response to the biggest cumulative two-year drop in spending power on record.

Those forecasts prompted fellow Wall Street investment bank, Goldman Sachs, earlier this month to brand the Bank as the gloomiest of all monetary authorities.

Figures released today showed inflation climbed to a fresh 40-year high of 10.1 per cent last month. But, some economists have warned prices will climb over 15 per cent in January, caused by energy bills rising again after October’s large hike.

“Consumer inflation expectations had been falling for three months but jumped in the first half of August, shortly after the BoE’s new forecasts for inflation were published,” Bank of America said.

Workers who have dropped out of the jobs market due to long-term health issues mainly caused by Covid-19 are reluctant to return to the workforce.

Some “62 per cent of people who report they stopped working due to long-term sickness reported no plans to return to work,” Bank of America said, adding “that is 9 percentage points higher than our survey found in February”.