U.K. Consumer Confidence Stays Near Three-Decade Low, GfK Says

By Svenja O'Donnell

Nov. 28 (Bloomberg) -- U.K. consumer confidence stayed close to the lowest level in more than three decades in November as gloom about the recession deterred spending, GfK NOP said.

An index of sentiment, based on a survey of 2,000 people between Nov. 7 and Nov. 16, rose one point from the previous month to minus 35. A gauge measuring the general economic situation in the past year rose one point to minus 71, still 39 points lower than in the same month last year.

Bank of England policy maker Timothy Besley said yesterday that the ``big issue'' for the British economy is to get banks to lend again. The seizure in credit markets and worsening prospects for economic growth has led consumer spending to drop and prompted the central bank to cut the benchmark interest rate this month to 3 percent, the lowest since 1955.

``U.K. consumers are still being battered by news about our poor economy in general and mounting concerns about job losses in particular,'' Rachael Joy, a spokeswoman for GfK, said in a statement. ``The dramatic cut in interest rates this month appears to have done little to improve sentiment so far, as U.K. consumers continue to fret over the impact of a looming recession.''

An index measuring Britons' personal financial situation in the next year rose two points to minus 10, GfK said. Expectations for the general economic situation over the next 12 months rose one point to minus 36.

U.K. house prices fell for a 13th month in November as the financial crisis deterred homebuyers and banks rationed mortgages, Nationwide Building Society said yesterday. Besley said that consumers need to pay down debt and save more as the economy rebalances.

Credit Squeeze

Prime Minister Gordon Brown this week urged banks to free up credit as political pressure mounts for measures to force them to lend. U.K. consumer spending dropped the most since 1995 in the third quarter as gross domestic product contracted 0.5 percent, the Office for National Statistics said on Nov. 26. Unemployment jumped the most in 16 years last month.

The central bank will cut the benchmark interest rate to 2.25 percent on Dec. 4, according to the median forecast of 26 economists in a Bloomberg News survey.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.