Page last updated at 09:11 GMT, Monday, 29 December 2008

An annus horribilis for consumers

By Martin Cassidy
BBC NI Consumer Affairs correspondent

Apart from the near meltdown of the financial system, a plummeting housing market and volatile energy prices, it was a fairly quiet year for consumers.

It started with little hint of the mayhem that would see some of Wall Street's best known investment banks go bust.

Lehman Brothers was one of the many casualties - pic AP
Lehman Brothers was one of the many casualties in 2008

Lehman Brothers was one of the many casualties as the credit crunch jumped from the housing market to the wider economy.

And just as rising house prices had helped fuel the consumer boom, so now the housing market slump has exposed a high level of consumer debt.

By the autumn, the slowdown in retail spending was hitting hard and the year finished with names such as MFI and Woolworths succumbing to the downturn.

Yet it was inflation which was seen as the biggest threat in the first half of the year.

Even in August, the Bank of England was more worried about inflation at more than twice the Government target of 2% rather than an economy which was running dangerously low in liquidity.

But by October, the red light was finally flashing and even with inflation running at 4.5%, the Bank of England started to worry about the prospect of deflation and the risk of a downward spiral in prices, jobs and investment.

House keys
Deposits of up to 20% are being requested when purchasing property

Consumers were battening down the hatches, the credit cards were being put away and demand for goods and services was slowing at an alarming rate.

The bank responded with interest rate cuts, however, not the quarter or even half per cent moves which barely register with many consumers.

This time the bank took a hatchet to borrowing costs and in a few mighty blows, cut its base rate to just 2%.

Under normal circumstances that would be enough to set off a stampede for the shops and a bumper time for estate agents.

But not this time.

The headline cost of borrowing may have fallen sharply, but money actually remains tight and in the case of first-time buyers deposits of up to 20% are being demanded.

Privately some of the banks admit they just don't have the funds to lend and that the appetite for risk is greatly diminished.

For businesses relying on working capital, it is proving particularly difficult.

Light bulbs
There was good news with regards to electricity prices

Not only are they under pressure from the banks to stay within tight lending limits, suppliers are screaming for early payment while their debtors are often finding it hard to pay invoices on time.

Some of the biggest names on the high street have responded to the economic downturn with price reductions and one-day sales.

For many retailers along the border though, it has been a time of plenty. Customers from the Republic have been flocking to border towns, taking advantage of a sharp fall in the value of the pound compared with the euro.

In the weeks running up to Christmas, there were traffic jams and rows over car parking spaces.

But even the border boom could not mask the decline in the wider Northern Ireland economy.


The sharpest monthly rise in unemployed figures for 28 years was registered in December when the number of claimants rose by 3,100 to 34,100.

Concerned about fuel poverty, the Executive at Stormont announced that 100,000 of the poorest households would receive a 150 payment.

There was better news too on gas and electricity prices.

Having seen tariffs increase by around 50% in 2008, NIE told consumers it would be cutting domestic bills by 10.8% in the new year while Phoenix Supply is to reduce its prices by 22.1%.

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