U.K. Consumer Confidence Declined in November, Nationwide Says

By Jennifer Ryan

Dec. 3 (Bloomberg) -- U.K. consumer confidence deteriorated in November to the weakest in at least four years as unemployment jumped and banks curtailed credit, Nationwide Building Society said.

An index of sentiment fell 6 points to 50, the lowest since the survey began in May 2004, Britain’s second-biggest mortgage lender said in a statement today. The reading, taken from a survey of 1,000 people from Oct. 20 to Nov. 16, compares with 83 a year earlier.

Chancellor of the Exchequer Alistair Darling proposed the government’s biggest fiscal stimulus in two decades to combat the recession on Nov. 24, after the survey was completed. The Bank of England will add to that effort by cutting the benchmark interest rate tomorrow to 2 percent, the lowest level since 1951, economists say.

Pessimism increased “against the backdrop of an emerging recession in the U.K. and continued global economic uncertainty,” Fionnuala Earley, chief economist at Nationwide, said in the statement. “It remains to be seen whether the Chancellor’s recent announcement will greatly improve consumer confidence.”

Nationwide’s index of consumers’ attitude on their present situation fell 5 points to 30, and a measure of sentiment toward future expectations declined 7 points to 63. A gauge of willingness to spend rose to 64 from 56.

An index of permanent staff placements by recruitment companies fell to the lowest since at least 1997 in November, the Recruitment & Employment Confederation and Markit said in a report today. The number of U.K. unemployment benefit claimants rose to 980,900 in October, the most since March 2001.

Services Shrink

Service industries probably contracted at the fastest pace since at least 1996 in November on an index compiled from a survey of about 700 companies, according to the median forecast of 33 economists in a Bloomberg News survey. Markit and the Chartered Institute of Purchasing & Supply will release that data at 9:30 a.m. in London.

Banks approved just 32,000 mortgages in October, matching the least since 1999. The home-loan shortage helped drive U.K. house prices to the lowest level since January, according to Hometrack Ltd.

Darling pledged on a 25.6 billion-pound ($38 billion) package of tax cuts and spending increases over two years to counter the recession, and said earlier this week he will “almost certainly” need to do more. He has already proposed a guarantee for mortgage-backed securities to boost home loans.

Policy makers reduced the key rate by 1.5 percentage points last month to 3 percent, the lowest level since 1955. The Bank of England may cut it by a further one percentage point tomorrow, according to the median forecast of 60 economists in a Bloomberg News survey.

The Trades Union Congress, which represents about 7 million workers, said today in a statement that the central bank should cut the benchmark rate “to 2 percent or lower.” Former policy maker Willem Buiter predicted yesterday that policy makers will reduce it to 1.5 percent, the lowest ever.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net