Farewell feelgood factor

Forecasting/ gloom takes a grip
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The Independent Online
BAD NEWS not only for John Major but for Tony Blair too: the "feelgood'' factor will not return before the end of the century, and may never reappear.

Studies by the Henley Centre for Forecasting, one of Britain's leading think-tanks, suggest that a combination of new factors has produced unprecedented unease among consumers - and this will probably be unaffected by a change of government.

Among them are the rise of the global market, which poses a continuing threat to British living standards, and a sense of "pervasive alienation" from government and public institutions.

The studies, mainly undertaken for industry, also suggest that the depressed housing market, the overhang of "negative equity" from the house price boom and widespread job insecurity will be with us for years to come. All contribute to low consumer confidence. So does "defensive spending": the need for people to devote ever higher proportions of their earnings to areas such as health, education and pensions which were once the preserve of the welfare state.

The centre's "Frontiers" European research programme found that 64 per cent of British workers are "very or fairly" concerned about losing their job, the third-highest level after eastern Germany and Spain. About half a million British professionals and managers, the socio-economic ABs, are doing contract or temporary work. "These are people who have been conditioned to the idea of jobs for life," said a Henley source.

Negative equity, which still affects nearly a quarter of householders, is also part of a historically high level of personal debt. In 1980, for every £100 of income, people owed £40. In 1991, average debt had risen to £103. The latest estimate, for last year, shows it fell only to £95.

The decline in the welfare safety net has resulted in a rapid increase in "defensive spending" or, as Henley labels it, "informal taxation". By 1999 it will have grown to more than 5 per cent of personal disposable income, compared with 3.5 per cent in 1989 and 4.3 per cent last year, when it was equivalent to 8p on the basic rate of tax.

Defensive spending is designed to cope with the "vicissitudes of life and it doesn't make you feel good", according to Henley. Its growth means that "free" consumer spending is forecast to grow at little more than 1 per cent a year for the remainder of the Nineties.

Henley has also identified new psychological factors at work, including a decline of trust in government, which stops people investing in the future, and an awareness that there is a "global excess capacity" in industry. People are delaying buying products such as personal computers, because they know that "in six months' time you will get a PC which has twice the power at half the price".

Combined with what Bob Tyrrell, Henley's chairman, calls the "Sod It - Oh Christ" syndrome - people embarking on spending sprees to cheer themselves up, only to find they do not have the money - this has produced a new pattern of isolated boomlets which rapidly peter out.

Mr Tyrrell said last week that the underlying culprit was global competition and its impact on employment. Among possible solutions were protectionism, which might preserve social cohesion but at the expense of a trade war, or a new set of values, emphasising citizenship and altruism rather than the "customer culture".

He added: "We are in uncharted waters here. We need a revolution of falling expectations. Many people may not have the resources or the confidence to deal with self-employment or the end of the full-time job. If that is the case, then the feelgood factor will not return in the form we have known it for the past 30 years."