Consumer confidence rising - but City fears EU backlash

Confidence is creeping back in the UK. Nothing that some reactionary EU policy-making can't solve...

by
Last Updated: 31 Aug 2010

Consumer confidence ticked up for the third consecutive month in April, according to pollsters GfK NOP. Of course, it’s all relative – the index is still pretty low by historical standards – but at least it looks as though we’re all feeling a little cheerier about our economic prospects for the coming year.  So it’s hardly an ideal time for the EU to be trying to derail the City’s recovery with a raft of ham-fisted and short-sighted regulations…

GfK NOP’s Consumer Confidence Index rose three points to -27 in April, its highest point for 12 months. According to GfK’s Rachael Joy, the uptick was ‘largely driven by the public’s perception that the next twelve months will be better for both our own personal finances and particularly for the economy in general.’ The prevailing view of the overall state of the economy rose 16 points to -15, while consumers’ view of their own finances was up 3 points to -3. The Government continues to insist that the recovery will begin this year, despite most economists thinking otherwise – Treasury wonks with particularly rose-tinted glasses will see this as further proof.

Of course, it might just be that the sunshine over Easter weekend made people disproportionately cheerful. Figures released today by Nationwide suggest that last month’s surprise increase in house prices was nothing more than a blip – the average cost of a house fell another 0.4% last month, and has now dropped 15% in the last 12 months.  And it’s also worth noting that this poll was carried out before last week’s Budget – we can’t imagine anyone who sat through that was left feeling terribly optimistic, on any front.

There was more bad news for UK plc from Brussels yesterday – the EU is plotting a crackdown on alternative fund managers, who they’re trying to blame for the credit crunch. Hedge funds and private equity firms with assets of more than €100m (i.e. lots of them) will be hit with a new disclosure regime, tougher capital requirements and limits on leverage – despite the fact that there’s no evidence that they either caused the credit crunch, or represent any kind of systemic risk (particularly relative to the banks). And since many of these funds are based in London, the City is going to feel much of the pain from this new regime. Cynics may wonder if that’s why the EU is so keen on the plan…

Still, the City will have to get used to the idea; there's clearly more regulation on the way for the financial services industry, whether it comes from Brussels or Westminster. Indeed, the FSA is arguing against the new EU rules, suggesting that it's got the situation in hand - although in the light of recent events, why they think that should appease anyone is beyond us.



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