UK consumers already affected by Brexit
After Britain voted to leave the EU last month, research suggests UK consumers have already lost considerable confidence in the economy. In the latest YouGov/Centre for Economics and Business Research (Cebr) Consumer Confidence Index, it was revealed three years of rising economic sentiment disappeared in only four days. So, what are the early effects for consumers?
Consumer confidence falls
In May 2016, the YouGov/Cebr index rated UK consumer confidence at 113.6, before it was downgraded to 111.9 for the period 1–23 June 2016. Following the EU referendum, the index continued to fall until reaching 104.3 between 23 and 27 June. When announcing the results, YouGov noted how confidence was last at 104.3 in May 2013, while the lowest ever score of 67.4 came during the 2008 financial crisis.
YouGov said consumer concern about property prices and whether employers will struggle over the following 12 months were the main reasons for the decline in confidence. Head of YouGov Reports Stephen Harmston offered the following insight: “Our latest data show just how spooked households are by recent developments. In the coming months, this is likely to filter through into a much weaker environment for retail sales and household spending”.
Large purchases shelved
A recent Guardian article suggests some UK consumers have backed out of big purchases following the Brexit vote. Estate agents haart reported an 11% increase in property deal cancellations for the last weekend of June 2016, compared to the same period in 2015.
Further, the Guardian article revealed that a survey by economics research company Retail Economics found over a third of UK consumers intended to refrain from large purchases. This is consistent with YouGov's warning of weakened retail sales and lower household spending to come, with big ticket items especially at risk.
At present, the pound’s falling value means consumers will start paying more for imported goods, such as clothes and groceries. Among major retailers, foreign exchange costs have been negotiated in advance to minimise short-term price increases, but the current deals shall end later in the year. That is when consumers will feel the full impact of a weakened pound on imports.
Moving forward, budgeting will only become more important for UK consumers. If you are struggling with debt contact Dukes Bailiffs for professional advice.