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PBR: Consumers won’t spend more, says BDO Stoy Hayward

The slowdown in consumer spending will continue and businesses will carry on curbing their investments despite the Government measures announced in the pre budget report, according to BDO Stoy Hayward.

Global macro economist Catherine Macleod says: “Regardless of the measures that the government puts in place to stimulate the economy, we expect to see a continued retraction of consumer spending as the ultra-low savings rate moves upward and the housing market corrects.

“A sharp decline in business investment is on the cards as are rising business defaults. This is part of an inevitable realignment of the economy and it seems to us unlikely that the government measures will be able to actually mitigate the problems.”

But Macleod adds that the report has put forward some positive arrangements to help companies manage their cash flow.

She says: “The difficulty of managing a banking and corporate crisis is that cash needs to flow to companies that are still commercially viable and some measure of adjustment from the previous era will no doubt be necessary.

“By focussing on providing tax breaks and write offs to help companies manage liabilities and hence improve their cash flow situation could well help to ease some of the burdens faced by companies.”

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