/ Money

Is anyone thriving in our gloomy economy?

Rain cloud with a smiley face

Last week was another grim week for UK consumers, with the latest indicators suggesting that the economy’s still struggling to push ahead following the downturn of the last few years. How is it affecting you?

Inflation in October 2011 (CPI) was confirmed at 5% last Tuesday.

Then the following day we were faced with the triple-whammy: unemployment reaching 2.62 million; youth unemployment topping the 1 million mark; and the Bank of England’s growth predictions for 2011 and 2012 being revised downwards to around 1%.

Savers and investors struggle to match inflation

While the cost of the goods and services you have to pay for is increasing by 5% each year, the best you can expect to earn on your savings is around 3%. The very best five-year fixed rate bonds are currently only paying 4.65% – and that’s before tax.

Are these discrepancies starting to affect your life yet? I’ve particularly noticed that the increasing price of petrol means that putting a tenner in the tank seems to get me virtually nowhere these days. My savings rate has also reverted to a paltry 0.5% and this week I’ve moved all my cash into a new internet account that pays a better rate, but still no great shakes.

Poor returns on cash deposits have persuaded some people to consider equity-based products as an alternative, but growth in the markets has been, at best, patchy.

The FTSE 100 has battled with various negative factors since the Northern Rock affair heralded the start of the credit crunch – the latest being the eurozone crisis – and the index is below the level it was 12 months ago.

A few silver linings

If there is one hint of a silver lining it’s that increases in the state pension are now linked to inflation. Pensioners can at least be sure that their state pension income will rise in line with inflation each year. The relatively low cost of mortgage borrowing (if you can get a mortgage) is another current bright note.

So how are you coping as things get even gloomier? Perhaps you run a business that’s continuing to thrive at the moment, or you’ve benefited from the ongoing cheap cost of borrowing? Are there any uplifting stories amid the doom and gloom of recent economic news?


No, no uplifting story from me either. Have worked hard all my life and now my savings are getting virtually no interest because we have to help the poor bankers who could not handle a p@@s up in a brewery while they are still getting their big fat bonuses and got our help to save them from a tricky situation. Did they learn anything? as if.

franes says:
2 December 2011

Gold is doing just fine.
Over the last decade it has returned an average of 8.5% after inflation.

The value of money will have done the reverse.
Convert your Savings to something tangible before they disappear.

We have savings and as pensioners now we had planned to use interest to help support us in retirement but as my wife and I only have a state pension we are seeing our saving slowly reducing month by month . We have fixed bonds but only over 1 year and they are in the smallest amounts permitted (usually £5000.00) because the penalty for accessing bands before maturtiy is 90 days interest so the smaller bond amount the less the interest should you want your money. We cant get any assistance with rent,council tax etc because of our savings. I think the government should be looking at retired people (and there are many) who can prove their intentions for self sufficiency as much as possible with special OAP savings accounts with interest paid at a much enhanced rate . Daydreaming? No, I dont think so. If the VAT increases pensioners have to pay it; if fuel increases, well you know what I am saying. It goes on and on. People of my age (66) and younger and much older helped put the “great” in Britain . Contributions of all kinds have been made and we should be rewarded for this, not punished by the well off leaders of our country . My wife and I realise we are better off than many people are these days but we have had very rough years particularly in the last big recession in the early 1990s when interest rates did the opposite and were very high and I lost my business then with huge debts to banks etc etc aand no prospect of a job as business/companies folded daily.