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The prospects of a bleak Christmas on the high street are rising sharply as a survey out today shows a big fall in consumer spending in spite of lower interest rates and petrol prices.
Downing Street's hopes for a consumer-led recovery fired by a cut in VAT will also be further damaged by another report that shows hiring intentions by firms have collapsed, adding to fears that unemployment will rise. In the wake of the news of 2,000 job losses on Monday, 1,200 more jobs were under threat yesterday.
The news comes as the Bank of England begins its latest two-day meeting at which it is expected to cut interest rates to 2%, one of the lowest rates Britain has ever seen.
Nationwide said its monthly index of consumer confidence fell again and to the lowest since its survey began in 2004. The index reading of 50 for November compares with 56 last month and 83 in November last year.
Fionnuala Earley, Nationwide's chief economist, said: "Consumer confidence dropped again this month against the backdrop of an emerging recession in the UK and continued global economic uncertainty ... Reports of job cuts have almost certainly impacted on sentiment about the present and future employment situation, causing purse strings to tighten further."
The gloomy survey comes after Debenhams said it would have another pre-Christmas, three-day sale, starting today, in which discounts of up to 20% would be on offer. Marks & Spencer also decided to hold another one-day, 20%-off-everything sale tomorrow following its move two weeks ago.
Retailers are facing big drops in spending by Britons as unemployment rises and fears of recession are prompting people to cut back on anything but essentials. New car sales, for example, have collapsed. Last week Woolworths and MFI both went into administration.
Yesterday Scottish retailer Bowie Castlebank said it would shed 817 jobs across its businesses, which include photo-processing chains Klick Photopoint and Max Spielmann and dry cleaner William Munro. Another company, Novelis, which makes aluminium products, said it was reviewing the future of 450 jobs at its plant in south Wales.
Today's survey from the Recruitment & Employment Federation and KPMG shows that the labour market is deteriorating at an alarming pace. It said that permanent and temporary placements by recruitment agents fell at the fastest pace since the survey began in 1997 while permanent salaries and temporary pay rates also saw record falls.
Mike Stevens, head of business services at KPMG, said: "This latest survey leaves no doubt that the UK jobs market is now heading downhill at breakneck speed."
Further grim news on the economy emerged yesterday as a report showed the country's once-booming construction sector contracted for the ninth month running in November - and at the fastest pace on record.
The Chartered Institute of Purchasing & Supply/Markit purchasing managers' index for the sector - a broad measure of activity, orders and employment - dived to 31.8 in November from 35.1 in October.
With house prices and commercial property values in freefall, construction companies have been abandoning building projects and scrapping planned ones and have laid off thousands of workers.
Roy Ayliffe, director of professional practice at CIPS, said: "The unyielding global economic challenges continued to depress the UK construction sector in November. Purchasing managers reported significant falls in new orders, industry output and employment."
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