UK recession a 'one year wonder' according consumers

As Japan, France and Germany finally break free from the clutches of recession, UK consumers are still being bombarded with conflicting reports about the severity and length of our current economic climate. Despite this, research from uSwitch.com shows a surprising level of optimism and reveals that 6 million (13%) consumers predict that that the UK economy will emerge from recession before the end of 2009, and a further 44% expect a return to positive growth at some point in 2010.

This optimism spills over into the housing and labour markets. One in four (25%) consumers predicts a speedy recovery for the labour market, forecasting that the UK will witness a return to healthy levels of employment by the end of 2009. However, a quarter (24%) think that unemployment will get a good deal worse before it gets better, predicting that the UK will see figures equal their historic high of 1986, rising in excess of 10%.

Reports examining unemployment trends from previous recessions reveal that unemployment historically continues to rise long after other indicators have stabilised. This has resulted in some areas of the UK taking as long as a decade, to see a recovery in their regional labour markets, and people becoming permanently excluded from the jobs market.

In the face of such unprecedented financial turmoil, over 10 million (21%) UK consumers believe that the UK housing market will recover by the end of the year, indicating that the inherent steadfast trust in bricks and mortar is still holding true. Experts and housing market indices are agreed that homeowners are extremely unlikely to see their property prices recover to the highs witnessed pre-recession for some time, with some predicting that it will be 2017 before values return to the level they peaked at in 2007. History tells us that on average, following major financial crises, housing prices decline by 35% over a six year period.

The Blame Game

It is not all ‘rose-tinted spectacles' amongst UK consumers with over 16 million (34%) consumers believing this recession to be the ‘worst in history'. The majority (51%) of consumers point the finger of blame at UK and American banks, almost one in ten (9%) believe the fault for the cause of the recession lies closer to home in consumers' excessive spending and borrowing, yet 14% have a more philosophical attitude, believing recession to be an inevitable cyclical event.

Governments are also held culpable as instigators of the current recession for one in four (25%) consumers. Some of the UK government's actions to stimulate the economy have also been met with some reservation, as over half (54%) believe the plethora of base rate cuts have not served to improve the economic situation at all, and almost one in ten (8%) actually deem this fiscal policy to have made matters worse.

The Confused

uSwitch.com's research also reveals a degree of confusion as to what actually constitutes a recession and the reasons as to why the economic climate has deteriorated. Over half (55%) of UK adults incorrectly cited what technically defines a recession, and 43% could not say for sure what indicators would need to show to confirm a return to positive growth.

Every cloud...

4.3 million consumers feel that the recession has had a positive impact on their financial wellbeing. Of these consumers, over a third (35%) have seen their mortgage repayments decrease, and over half (54%) have secured bargain purchases as retailers compete to cut prices. On the job front, 13% of these state they work in recession-proof industries and have never been busier, whilst 3% of respondents even feel that redundancy was the best thing that happened to them having embarked on a new business venture or change of career. A third (36%) of these people also believe the recession to have had a positive impact in the form of engendering an increased ‘financial savviness', thereby making them equipped to make better financial decisions in the future.

Louise Bond, personal finance expert at uSwitch.com comments: "No one can accurately predict when the current climate will abate. However, consumers really need to be aware of the financial legacy a recession leaves, long after a return to positive growth. People are already making significant cutbacks in the ongoing struggle to meet their monthly outgoings in the face of rising bills and the depreciating value of their assets. Despite the doom and gloom, however, many consumers are seemingly exhibiting a ‘British Bulldog' spirit amidst the financial crisis and finding ways to accentuate the positives. It is encouraging that consumers are also taking their financial future into their own hands by committing to changing their financial behaviours for the better."