Rate Hikes Tighten Spending....
07 September 2007
Recent interest rate hikes have led to a decline in demand for holidays, fitness purchases and beauty treatments, as Brits tighten their purse strings, recent figures suggest.
According to the Confederation of British Industry (CBI), the effect of interest rate rises is now starting to be felt, as increasing numbers of consumers become more cautious about their spending habits.
Over the past three months, the CBI found that sales in the leisure, personal care and travel sectors fell significantly.
Recent wet weather and rising household bills were all blamed for the decline in consumer spending.
Martin McAfferty, CBI economic adviser, warned that these types of businesses did not expect business to grow in the near future.
"Consumer services firms don't expect to expand their businesses in the coming year," he said.
"Costs are expected to continue growing at a rapid rate, with less scope for firms to raise prices, which will inevitably put profit margins under greater strain."
The Bank of England's Monetary Policy Committee has voted to raise interest rates five times since August 2006 to the current level of 5.75 per cent.
