Commercial Properties Affected by Further Falls in Spending Power

Posted on 25 April, 2012 by Kirsten Kennedy

Lloyds TSB’s Spending Power Report has revealed that consumers’ spending power has deteriorated yet again, falling to the lowest level since February 2011. This could have a direct effect upon retail commercial properties, as customers struggle to save enough money to spend on non-essential items.

The report defines spending power as any money left over after buying essential items, such as food and petrol, as well as paying bills for gas, electricity, utilities, council tax and mortgage payments or rental costs. TV licenses are also included in this definition. Lloyds TSB provide additional information by surveying 2,000 consumers about their regular monthly outgoings.

Part of the reason for the 1.1 per cent fall in spending power in a single year (with inflation accounted for) is the rising cost of essential items. In fact, the report revealed that essential spending is rising at a dramatic rate, at an average of 6.2 per cent annually. Due to the rise in fuel prices, commercial properties have been forced to raise prices for most items, including food and drink, to account for delivery costs from suppliers. This also applies to non-essential items such as electrical and white goods.

Chief economist at Lloyds TSB, Patrick Foley, said; “Contrary to expectations at the start of the year, the squeeze on consumers is not yet beginning to ease.

“Although overall inflation declined in the five months to March, prices of essentials are rising at an increasing rate, whilst at the same time growth in incomes has slowed.

“The pace of economic recovery is thus likely to remain very weak over the next few months at least, with subsequent improvement dependant on a stabilisation in living costs and impetus for growth from outside the consumer sector, particularly exports.”

Other factors influencing the figures released in the report include a lower number of commercial properties offering promotions, partially due to the proposed fuel strike, and motorists panic buying petrol in the last week of March, again as a result of uncertainty regarding petrol and diesel deliveries.

Inflation and rising costs of household bills, however, remain the main reasons for consumers being incapable of putting petty cash aside to spend in retail commercial properties.

Which? executive director, Richard Lloyd, highlights some of the major issues for taxpayers in society struggling to make ends meet. He says; “We know a great swathe of UK consumers are finding it tough, with people struggling with rising fuel, energy, mortgage and food costs.

“Our own research shows one in four people being forced to use their savings to buy daily essentials like food, and one in five going into debt to buy these things.

“With consumer confidence so low, and people running down their savings and assets, an increasing number of household budgets will remain vulnerable until at least 2016.”

In conclusion, these figures indicate that commercial properties in the UK may have an uphill battle for survival on their hands. Should consumer spending power increase in the next few years, meaning a dramatic drop in essential costs, savings that would usually be spent on luxury items may have to be re-allocated so consumers can pay mortgages and buy food and fuel.


If the UK economic forecast does not improve, we may soon be seeing more commercial property chains following Peacocks, GAME and Aquascutum into administration.

Are you a consumer forced to spend savings on essentials such as food, fuel or home repairs? Or are you a small business owner, concerned about the effect the figures in this report will have on your commercial property? Join the discussion on Movehut’s facebook page.

 

 




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