The latest data on the economy has suggested the UK may not be heading into recession after all, an expert has said.

According to the Markit/CIPS Purchasing Managers' Index (PMI) for services, the sector saw very positive movement in January, with a jump in the index from 54 to 56 and the highest increases in confidence in a single month recorded in the history of the survey.

The news follows an improvement in the manufacturing PMI and Royal London Asset management economist Ian Kernohan said: "While it would be wrong to read too much into one month's set of data, it looks unlikely that the UK has entered a double-dip recession."

Chief economist at Markit Chris Williamson said the indications suggest the UK economy may in fact expand at around "trend" rate (the equivalent of 2-2.5 per cent annually) over the first quarter.

He remarked: "Much uncertainty persists, but this is nevertheless a far better start to 2012 than almost all were expecting to see."

However, for those who are in debt, any economic recovery could take a long time to provide the sort of benefits that could translate into an easing of their situation, such as the availability of better-paid jobs.

For those who are in difficulty now, seeking a debt management plan may help, as it can spread payments out and make it easier to cope, ensuring ends are met while personal finances are still under strain and making matters easier to handle as the economy recovers.

By Joe White
 

Debt consolidation measures are helping householders to reduce their debt levels, a new survey has indicated.

The February digest of statistics from finance charity Credit Action has revealed the amount of interest being paid by UK consumers on personal debt was £171 million in December 2011, compared with £173 million a year before.

However, this may not be quite as simple a good news story as some would imagine, the charity's chief executive Michelle Highman suggested.

She said it is likely the falls in debt "represent an increased level of caution and concern in your average household, which impacted confidence in putting Christmas on credit last year".

"Whilst it is heartening that people did not overspend, the underlying reasons for not doing so may prove to be a real cause for concern in the coming year," Ms Highman added.

People who are struggling financially to the point that they dare not borrow more may find they are still finding it impossible to pay what they do owe, a situation that could leave those owing £15,000 or more left considering an individual voluntary arrangement.

Such a deal works by agreeing with creditors not to go bankrupt and leave them with nothing, but to pay a reduced amount over a period of up to five years, at the end of which any remaining debt is written off.

One advantage of an IVA is that it is confidential, so the potential stigma of having an insolvency made public knowledge that bankruptcy can cause will be avoided.

The statistics in the survey tally with the findings of the Bank of England's latest Trends in Lending report, which suggested consumer credit borrowing was subdued, with credit card usage levels "weak".

By James Francis

UK consumers have seen a slight improvement in their financial wellbeing, a new survey has revealed.

The latest Alliance Trust UK Financial Reality Index showed a rise in the fourth quarter (Q4) of 2011 from 56.7 to 62.1.

However, this still spells trouble for struggling families and individuals, as the overall mark is still below the score of 100 that would mean consumers are getting no worse off overall.

Low economic growth, high debt levels and the weak labour market all contributed to the malaise.

And the latest figure comes after the third quarter posted the largest drop in financial wellbeing in the history of the survey.

Senior economic analyst at the Trust Linsey Thompson emphasised that it is clear which part of personal finances is seeing the greatest level of difficulty at present.

She said: "The net wealth index received a boost from a small increase in both house prices and equity markets, but this is still the weakest component, due to highs level of consumer debt. Meanwhile, household budgets continue to come under pressure from high inflation and muted wage growth, despite a rise in the index in Q4."

Ms Thompson added that as the track record of the survey has tended to be a good indicator of consumer spending patterns, it is likely that there will be a further decline in this in the months to come.

And for those struggling to balance household budgets with debt repayments, the trouble is not about to go away, according to spokesman for candidmoney.com Justin Modray.

He said last week that pay freezes are likely to continue for another year or two, stating a lack of public sector cash and competition in the labour market as unemployment rises will keep pay rates down.

Posted by Paul Thacker