Consumer confidence tumbles in wake of Leave vote

Shoppers at Glasgow Fort. Picture: John Devlin

Consumer confidence has seen its sharpest drop in more than 20 years since the Brexit vote, with a third of shoppers believing prices will increase rapidly in the next year.

Some 60 per cent of consumers expect the general economic situation to worsen in the next 12 months – up from 46 per cent in June – while just 20 per cent expect it to improve, down from 27 per cent last month, according to a one-off GfK Consumer Confidence Barometer survey taken after the referendum in which Britain voted to leave the European Union.

The proportion of people who believe prices will increase rapidly in the next 12 months has jumped 20 percentage points to 33 per cent.

The core index has fallen eight points to minus 9, and all key measures used to calculate it have fallen.

The long-running survey, which dates back to 1974, has not seen a sharper drop since December 1994.

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GfK head of market dynamics Joe Staton said: “During this period of uncertainty we’ve seen a very significant drop in confidence, as is clear from the fact that every one of our key measures has fallen, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months.”

The poll revealed distinct differences in how confidence has changed regionally, with confidence dropping 19 points in the north of England and 11 points in Scotland. In the south, including London, there has been a two-point drop.

Confidence among 16- to 29-year-olds has dropped 13 points, but this group remains the most optimistic of all age groups.

The biggest dip in confidence from a household income perspective is among those earning between £25,000 and £49,999, who registered a 16-point drop.

Meanwhile, figures released by BDO’s monthly High Street Sales Tracker show the Brexit vote had an immediate impact on the high street, which suffered its worst June in more than ten years.

A strong start to June saw overall sales grow 3.8 per cent year-on-year in the first week, but the “Brexit effect” hit retailers with increasing severity as the month wore on.

Sales saw a 3.1 per cent drop in the second week and by the final week of June – two days after the Brexit vote – overall year-on-year sales had plummeted 8.1 per cent.

Sophie Michael, head of retail and wholesale at BDO, said: “Many retailers may have hedged against the falling pound for the short term, but if sterling stays at these levels, the cost of importing goods and further erosion to margin may need to be passed onto the consumer.

“While reports suggest that average income has reached a historic high, the challenge for retailers is to convince consumers to spend their surplus income with them, amid the temptation of a post-Brexit spending paralysis.”