Consumer Confidence in U.K. Plummets on Brexit Worries
Consumer confidence in the U.K. has fallen dramatically since the U.K. voted to leave the European Union on June 23.
Market research firm GfK's consumer confidence index fell eight points after the Brexit vote to minus nine. This is the sharpest drop since December 1994.
Figures from advisory group BDO show retailers were not getting much love in the run up to last month's referendum, showing the sector had its largest drop in sales in June in a decade.
GfK ran a one-off survey to measure consumer confidence after the referendum, they spoke to 2,002 respondents between June 30 and July 5.
There was a significant split between those who voted to remain and those who voted to leave, with "remainers" at -13 and "leavers" at minus five.
Respondents had concerns over the economic outlook of the U.K., with 60% saying that they expect the general economic situation to worsen over the next year, compared with 46% in the June survey.
There was also a fear that prices would rise, with the proportion of people who believe prices will increase rapidly over the next year increasing by 20 percentage points to 33% from 13%.
The Bank of England has been warning of the impact of low confidence. In a speech last week governor Mark Carney said that uncertainty has contributed "to a form of economic post-traumatic stress disorder amongst households and businesses, as well as in financial markets," which is causing risk aversion.
He added that households are putting off buying durables. "The common thread is that any economic decision that requires finance, has a sunk cost, or an uncertain payoff, is affected."
There were also marked regional differences. Confidence in Scotland dropped 19 points. A large majority of that nation voted to stay in the EU. Confidence in the north of England dropped 15 points but in the south it only dropped two points.
GfK's head of market dynamics, Joe Staton, said that the analysis shows that sectors such as travel, fashion and lifestyle, home, living, DIY and grocery are vulnerable to consumers cutting back their discretionary income in the wake of the referendum.
"As we've learnt from previous periods of uncertainty, consumers turn to well-known brands they love and trust as a guarantee of quality and value for money. Now is the time for companies to understand and respond to consumer concerns by anticipating and meeting their needs," Staton added.
Figures from BDO show U.K. retailers had their worst June in a decade. Sales at stores that had been open for at least a year fell 3.6% in June compared with the same month in 2015.
BDO found that sales were strong in the first week of June, growing by 3.8% year-on-year. However, the Brexit-effect was felt in the rest of the month, sales fell 3.1% year-on-year in the second week of June. And by the last week of the month - two days after the leave decision - year-on-year sales fell by 8.1%.
Sales in the fashion sector fell by 4.9% in June and homewares lost 6%.
Retailer Marks & Spencer (MAKSY) yesterday reported its steepest drop in clothing sales in eight years, with same-store sales of clothing and home goods in the first quarter falling 8.9%.
Shares in M&S, as it is commonly referred to in the U.K., have fallen 15% since the Brexit vote but were recently trading 4.58% up.
UBS analysts yesterday upgraded M&S to neutral from underperform and lowered its target price to 320 pence from 340 pence. The share is currently trading at 315 pence.