Confusion over Brexit’s effect on spending as two reports show opposite results
If there's one thing that's certain about Brexit it's that there are no certainties at the moment and that extends to consumers as well as the UK government. Two contradictory reports this week suggest that consumer willingness to spend is restrained because of Brexit but also that shoppers are prepared to carry on spending.
As we said…confusing. First the latest consumer confidence report from IHS Markit. It said that Britons' confidence in their finances has fallen at the fastest rate in a year this month and that people are more worried about job security than ever.
Its household sentiment index is at a low 43.4 for February with any reading above 50 indicating positive sentiment and anything below meaning consumers feel concerned.
IHS Markit said that a slowing economy is to blame for consumers being unwilling to spend too much of their disposable income, even though wages have been edging upwards and unemployment is at the lowest level in decades.
The report said that worries about job security rose for the fourth month running with those working in retail and manufacturing being the most concerned.
And Britons feel more pessimistic about the prospects for the year ahead then they did only last month, possibly affected by the lack of progress on a Brexit deal.
So with all that in mind, how come another report is painting a very different picture? The report, from accountancy firm PwC, claims that 60% of consumers aren't planning to adjust their spending plans at all this year on the back of the consequences of Brexit.
The company spoke to more than 2,000 people and what seems on the surface to be particularly significant is that those in parts of the country that voted to leave the EU are more upbeat about the economy and less likely to change their spending habits.
In fact, a chunky 70% of consumers in the north-east of England plan to carry on spending this year. But as many as 41% of shoppers in Remain-supporting London said they had already reined-in their spending and 14% on top of that are about to do so.
But this might not only be about areas that voted to leave or remain, with PwC saying that it's also a reflection of how wealthy certain areas are. Consumers in poorer parts of the country tend to spend a larger proportion of their income on necessities and are therefore less likely to curb such spending. In wealthy parts of the country, more spender goes to discretionary items and these are easier to cut back on.
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