According to a recent report economic optimism in the UK has dropped to its lowest level in a quarter of a century, with a number of factors all pointing to the increasing risks of recession. Many are wondering whether the UK is heading the same way as the United States in terms of the economic downturn, and the matter has been made worse by the fact that for the past couple of months interest rates have been left on hold at 5% whilst borrowing costs, in many cases, have continued to rise.

A survey was recently carried out using over two thousand people, who were polled about their views over the economy. The resulted showed that pessimism about the economy hadn’t been this low since 1983. The UK is facing its worse housing slump since the dark days of the early 1990s, coupled with rising living costs, with petrol prices reaching record highs. In addition to this is the global credit crunch, which has seen the cost of borrowing rise and the availability of finance plummet.

The report has put additional pressure on the Bank of England to cut interest rates again. Whilst the central bank has cut rates three times since December of last year following five rate hikes between August 2006 and July 2007, it has since resisted calls to cut rates again, leaving the base rate at 5% in both May and June. The reason behind this is because of rising inflation levels, which have spiralled to a full one percent above the government’s target of 2%.

A survey from the Confederation of British Industry recently showed that prices on the high street have risen at the fastest pace since 1992, and the cost of food and other essentials has also soared, putting addition pressure on already strained household finances.

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