Analysis: A new deal for business?

Can investment and low prices go hand in hand?
Can investment and low prices go hand in hand?

By Helen Cleary and Ellen McLagan

As European political leaders look for a balance between austerity and growth, the UK public are grappling with their own trade-offs: wanting low prices on the one hand, but for companies to invest in Britain on the other.

From a double-dip recession, to spending cuts, to the deepening nature of the euro crisis, the economy is on everyone's minds. On the European stage, the debate is focused on cutting spending versus encouraging growth to navigate the EU through the next year. At Westminster, the government is dealing with the implications of ONS figures released this week which suggest that the UK economy's fall into recession is deeper than expected. And in homes around the country, families are feeling the squeeze. Just as politicians are trying to find a balance between spending cuts and growth, the public are trying to navigate a way through the downturn, wanting relief through low prices on the one hand while wanting companies to invest in Britain on the other.

New polling by Penn, Schoen Berland and economic analysis by Frontier Economics shows that the 'squeezed middle' is a misnomer. The "squeezed" are nearly everyone – and the squeeze is deeper and will last longer than we thought.


The economic downturn has personally affected over 80% of the UK population. Many people have less cash left over at the end of the month or are not able to make regular savings anymore. But a number have been hit harder by the downturn. Almost a quarter have not had enough money to pay their household bills and nearly one in ten have not been able to pay their rent or mortgage. And it is not just the middle classes that are being hit – the squeeze has hit all income groups, all social grades, and all regions of the UK.

Anxiety levels are rising. Two in five expect their overall standard of living to deteriorate over the next six months – and only seven per cent think it will get better. Concern about the day-to-day costs of living has rocketed since 2009. People are aware that the downturn is here for the longer term – more than 85% believe that the squeeze on incomes will go on through 2014 and beyond.

As the reality of the squeeze sinks in, people are increasingly looking to business for support. Ninety four per cent of public spending cuts are yet to hit the UK, and the public sector is due to come under more pressure in the next few years. Contraction of the public sector needs to be countered with expansion of the private sector, and consumers realise this.

While the debate in Europe is about cuts versus growth, UK consumers have to make their own trade-offs: would they rather see lower prices or companies investing in the country for the longer term?

The truth is that consumers are looking for businesses to provide both short- and longer-term support during the recession. They are demanding a new deal from businesses. Immediate relief through low prices remain the priority, but they also want companies to take responsibility for the bigger picture – by creating jobs, paying employees fairly and investing in Britain. Government cannot do it on its own, and people don't expect it to. They want companies to help the country through the downturn.

They do not currently feel that businesses are helping enough. Only nine per cent say that large companies are doing the most to help their families, while 27% believe that large companies should be doing more to help.

Businesses that respond to this demand will succeed: those that won't will lose. Signing up to the new deal will be a prerequisite of a sustainable business, and a prerequisite for (re)building consumer trust.

Polling was conducted by Penn Schoen Berland, a global research-based consultancy that specialises in messaging and communications strategy for blue-chip political and corporate clients. PSB conducted an online survey of 500 UK adults between 2nd and 5th May 2012. Quotas were set to ensure a representative sample, and data are weighted to the profile of the population.

Economic analysis is from Frontier Economics, an economics consultancy which specialises in the interrelationship between markets, organisations and government policies.

The opinions in politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners. 

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