Economy predicted to contract in 2012

07 August 2012

Older people concerned about their financial situation may wish to look into products such as equity release schemes, after figures showed the UK's economy is to continue to slow in 2012.

According to data released by the National Institute of Economic and Social Research (NIESR), the economy will contract by 0.5 per cent over the course of the year and will not return to growth until 2013.

Inflation

But it was not all bad news, as it stated consumer price inflation will fall below the two per cent target by the end of 2012, having been as high as five per cent in September last year.

Inflation affects older people more than other sections of society, due to the fact they are more reliant on energy and food prices remaining at a constant level.

"The continued weakness of the UK economy reflects both a lack of demand and the supply-side constraint of an unreconstructed banking system. The announcements of policies to support demand are welcome. The Funding for Lending scheme, the National Loan Guarantee Scheme, and UK Guarantees are all welcome, although the design of the schemes means significant deadweight losses are likely," it was noted by the NIESR.

It therefore called for the coalition government to introduce a clear plan for the UK's financial infrastructure, rather than what it described as a "piecemeal" approach.

Jubilee effect

NIESR also noted that the impact of the Diamond Jubilee on the economy may cover up the fact that output has now been flat for the last two years.

Inflation has been dropping in recent months and the figures from the Office for National Statistics showed there was a dip in the headline rate from 3.5 per cent in March to three per cent in April, bringing the rate close to the two per cent target set by the government.

But General secretary of the Trades Union Congress Brendan Barber argued that despite the fact inflation is falling, many households in the UK remain under "terrible strain".

Older homeowners considering unlocking money from the value of their house could find out more about their options by using the equity release calculator from Key Retirement Solutions.