Tough Times Are Coming, Unfortunately

You know that we are living in interesting times when a company like Marks and Spencer announce excellent trading results, but then temper that with a strong note of caution.

When I say “interesting”, I should really say “uncertain” or even “concerning”, though I don’t want to be too pessimistic, particularly with the recent bad news about the outlook for house prices.

So what is M&S alluding to when they set their cautious tone?

They are warning that the outlook for retailers, and therefore consumers too, is not looking good for next year. Basically it’s going to get tough for all of us, they predict.

Government spending cuts and the looming rise in VAT are going to hit our pockets hard – “Consumers’ disposable incomes will come under greater pressure” they say.

The child benefit cuts won’t be coming into force until 2013, so at least that monthly income will help parents afford the increase in VAT that will apply from January next year.

Personally, I don’t think that you can underestimate the impact of the rise in VAT to 20%. That means that the cost of most things that you buy will increase by 2.5% next year.

I know that we’ll get used to the higher prices, as we always do, but when a large company that is enjoying superb trading results signals caution for the immediate future, you can bet your bottom dollar (sorry, Pound) that we will all feel the pinch sooner or later.

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