11 February 2009

CONSUMERS’ FINANCIAL WELLBEING HITS RECORD LOW, ACCORDING TO LATEST FIGURES

A 12-year financial reality study by Alliance Trust has found that UK consumers face the worst all-round financial situation yet, caused by a sharp fall in economic growth, soaring unemployment and a continuing drop in the value of their net wealth.

Alliance Trust’s Financial Reality Index, a bespoke measure of how well off consumers are, showed a stark deterioration in the last quarter of 2008 when most of the factors that make up consumers’ financial wellbeing continued to worsen. The headline Financial Reality Index fell to just 34.5 – the lowest level since it began in 1997 – from 43.4 in the previous quarter, having been falling continuously since mid-2007.

Alliance Trust Research Centre analyses changes in the UK economic background, households’ budgets and their net wealth to compile the index. In the last quarter, all three of these principal components were below the critical level of 100 for the first time since the second quarter of 2005.

Sources: ONS, DCLG, CML, EcoWin and In-house analysis.

Shona Dobbie, Head of the Research Centre, said, “Consumers are now facing a triple whammy as their wealth, their budgets and the economic factors around them are all now in the doldrums. In the last quarter we saw the sharpest change in fortunes for the economic background because unemployment increased to around 6% during the quarter, from 5.2%, and GDP growth slowed to the weakest pace in the 12-year history of our survey.”

“Even though there has been a tiny improvement in the extremely strained situation of household budgets because slightly lower inflation is boosting real income levels, consumers’ financial situation remains very uncomfortable. One effect of this is that consumers are facing up to their financial reality by reining in spending. We expect our Financial Reality Index to continue to decline further in early 2009 due to rising unemployment and the possibility that consumer spending might even start to turn negative for the first time since 1992. Overall the picture for UK households remains bleak with almost all the key figures that combine to decide their financial wellbeing now deteriorating.”

· The full Alliance Trust Research Centre report, Financial Reality Index Q4 2008, is available at www.alliancetrust.co.uk/research_analysis.htm

Contacts

Jane Holligan, Media Relations Manager Anna Schirmer / Anna Moulds

Alliance Trust Lansons Communications

Tel +44 (0)1382 306064 Tel +44 (0)20 7490 8828

Mobile 07793 296813 Email alliancetrust@lansons.com

Email jane.holligan@alliancetrust.co.uk

Web www.alliancetrust.co.uk

Notes to editors

1. Alliance Trust PLC is a self-managed investment company with investment trust status. A FTSE-100 company, it is the largest generalist UK investment trust by assets listed on the London Stock Exchange.

2. Founded in 1888, the company is based in Dundee and has offices in Edinburgh and London.

3. The Research Centre is part of Alliance Trust and was formed to carry out economic and social analysis to deepen our understanding of economies, markets and socio-economic issues.

4. Photographs of Shona Dobbie are available.