UK loses £600bn in credit crunch

[TriWooOx]

Quote:The credit crunch, which has dragged the UK economy to the brink of recession, has wiped £600bn from the wealth of the UK - more than £1m a minute - since the crisis began a year ago, accountants said today.

A study by PricewaterhouseCoopers showed that housing wealth has plummeted by £400bn while sharp falls in the share prices ofbanks and financial institutions have wiped out another £200bn.

With house prices suffering a record double-digit fall last month, households are tightening their purse-strings and cutting back on shopping.

PWC's research focused on the housing and financial sectors, as they are particularly affected by the global tightening in lending. It warned that consumer spending could fall by another £12-16bn as the effects of the negative stockmarket and destruction in housing wealth filter through. This will knock off up to 1% from the country's entire GDP over the next year-and-a-half with additional impact on employment and growth.

"The fall in wealth will mean that UK household spending growth is likely to slow to just 0.5% in 2009," said John Hawksworth, head of macroeconomics at PWC. "However, that will not be enough in itself to push the UK into recession. We are sailing pretty close to recession but it will take something else to push us over the edge."

But the accountants said that its perspective is "conservative", and that this is its best case scenario, excluding the impact and likely spill-over of other important related sectors.

Separately, a survey by the Chartered Institute of Personnel and Development and financial services group KPMG found that more than a quarter of all employers now plan to shed jobs over the next three months.

The survey also revealed that the number of employers looking to take on staff this September - traditionally the most buoyant time for recruitment - dropped to only 29%, nearly 10 percentage points lower than for the same period last year.

John Philpott, chief economist at the CIPD, said: "The jobs market has been one of the few bright spots in the UK economy. But cracks are appearing in the face of an increasingly uncertain economic outlook."

http://www.guardian.co.uk/business/2008/au...onsumerspending