October 20, 2011 / 4:00 PM / 6 years ago

Britons count their pennies as inflation bites

LONDON, Oct 20 (Reuters) - Unemployed father Del Kirby is shopping for a gift in Argos, the British high street chain whose profits are evaporating, and which this week begged the government to put some money into his pocket.

"I don't really have a life. I don't go on holidays, I just live off my savings. But they're going to run out," says the former delivery driver inside the catalogue store in Whitechapel Road, a down-at-heel high street in east London.

Kirby leaves without buying, hoping the toy pram he wants for his three-year old daughter might be cheaper elsewhere.

In the poorer parts of London, the shopping scene now tells a story already familiar in parts of the country further away from the capital's banking and commerce wealth engines.

Money is tight, and it's getting tighter.

A few miles further east in Stratford, Britain is gearing up for Olympic glitz and glamour next year. But people living in the shadows of the multi-billion pound development see little to cheer about as they face soaring prices and rising unemployment.

"I cannot afford to shop in there when I cannot even afford to turn my heating on," said retired engineer John Smith, pointing to the 1.45 billion pound ($2.3 billion) Westfield development built as a gateway to the 2012 games and boasting more than 300 shops and 70 restaurants.

Stratford is one of Britain's most deprived areas, once known as "stinky Stratford" for its noxious industries and many slaughterhouses.

Local George Awnah has been pushed to cut back on basic necessities. "You have to pay your bills and at the end of the day you do not have any money left. Sometimes I go to school without eating," the engineering student said.

"I eat only once, so you can see how difficult my situation is," said Awnah, who works part-time at a centre for people with disabilities. He said he is feeling the squeeze after his working hours were cut.

Inflation in Britain hit a three-year high in September driven by soaring food, gas and electricity bills, further eroding living standards and piling more pressure on the government to help struggling consumers.

Unemployment jumped to its highest level since 1994 in September as private sector woes were compounded by the deep cuts in state spending, which has seen thousands of civil service roles vanish.

And for those still working, wages have generally failed to keep up with price rises, according to the Office for National Statistics, which said average weekly earnings were just 2.8 percent higher in August than a year earlier.

"I have been trying not to splash out on anything big and I have been going drinking in student places," said 27-year old accountant John outside department store John Lewis.

Prime Minister David Cameron, who said on Wednesday inflation was too high, has come under increasing criticism for a lack of economic growth and rising unemployment as his government slashes spending to get runaway deficits under control.

"The government should create more jobs and David Cameron should stop cutting this and that," said Peter Conway, a 57-year-old unemployed cleaner.

The government says it has taken strong measures to support ordinary people through tough times, including freezing council tax, cutting fuel duty and raising the minimum earnings threshold at which citizens start paying income tax.

But it can do little about the jump in consumer price inflation to 5.2 percent In September, driven by a whopping 22 percent increase in gas bills and a more than 6 percent rise in food prices.

Energy secretary Chris Huhne told households struggling to pay rising fuel bills they should change supplier, check their tariffs, or insulate their homes to try to save money, dismissing calls to pressure the six main privately-owned energy companies to use their growing profit to cut bills.

The economy barely expanded over the past year and Bank of England Governor Mervyn King said on Tuesday a slowing world economy threatened Britain's recovery.

After a promising start, 2011 has turned into an enormous disappointment for major rich world economies, which have been hobbled by a noxious combination of austerity, debt crises, natural disaster and political impasse.

In Britain, the economy has barely escaped from its biggest postwar downturn following a recession that the public largely blames on bankers, and the chances of another recession are growing.

Retail Pain

The boss of Britain's No. 1 household goods retailer, Home Retail which owns Argos, said cash-strapped shoppers needed help from the government after first-half profit at his company slumped 70 percent.

And even the powerful supermarkets -- usually so resilient to belt-tightening -- are feeling the squeeze.

Top retailer Tesco posted one of its biggest-ever falls in underlying sales earlier this month, while rival J Sainsbury SBRY.L reported only modest growth.

"We used to shop at Sainsburys all the time but now we are going to the basics range. We are cutting back and trading down," said 37-year old software developer Theodore Hong who has a six-month old son.

"We are just focusing on essentials now," said 32-year-old Katy who had taken the day off for her first trip to Westfield.

"We cannot drink in champagne bars all the time anymore."

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