Consequences of Brexit: GfK Consumer Confidence Survey


fall dip

Swimming- European Swimming Championships- London, Britain, 14/5/2016. Tania Cagnotto of Italy competes in the women’s 3m springboard final.

REUTERS/Matthew Childs

According to the latest survey from market research firm Gfk, UK consumers have seen their confidence in the UK economy fall at the fastest rate in almost 22 years after the vote to leave the European Union.

In a special survey commissioned around a week after the Brexit vote, Gfk found that consumer confidence in the UK fell by 8 points following the referendum.

It is the biggest fall since the end of 1994, when Britain was in the midst of a


and a real estate crash.

Here’s the graph showing just how big the drop was, courtesy of Gfk:

Screenshot 2016 07 08 at 09.11.42


And here’s the key snippet from Gfk’s version (emphasis ours):

By incorporating the same metrics we use every month in the Consumer Confidence Barometer (CCB), we can gauge — rather than guess — consumer confidence right now. JThe results show that confidence plunged, with the core index dropping 8 points to -9, and all key metrics used to calculate the index fell. For context, this long-running survey dates back to 1974, and there hasn’t been a steeper drop than that in 21 years (December 1994).

Region by region, confidence was hit the hardest in the north of England and Scotland, dropping more than 10 points. In the south, including London, it fell just two points. 16-29 year olds are the most optimistic consumers overall, despite a 13 point drop in confidence.

The hardest hit sectors of consumer spending in the post-Brexit economic landscape are products that are so-called “discretionary” purchases – essentially things we want and can buy when times are good, but don’t have to. not really needed. Things like vacations, new clothes, eating out, etc. As noted by Joe Staton, head of market dynamics at Gfk, according to the FT:

Our analysis suggests that in the aftermath of the referendum, sectors such as travel, fashion and lifestyle, home, living, DIY and groceries are particularly vulnerable to consumers cutting back on discretionary spending. As we have learned from previous periods of uncertainty, consumers are turning 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 responding to their needs.

While falling consumer confidence is symptomatic of the UK’s vote to leave the EU, it is also a troubling precursor to economic turbulence.

Generally speaking, consumers are the great saviors of the economy, but if they stop spending, things could go very wrong, very quickly. As we highlighted in March, people shifted their spending from consumer goods to food, suggesting that disposable income has fallen significantly, leading people to deplete their savings.

With uncertainty prevailing, it’s only natural that instead of spending on consumer goods, UK citizens are looking to boost their savings to weather any potential storms. Ironically, this may make matters worse.

The logic is simple: when people worry about the state of their finances, they stop spending, and when people stop spending, it can signal serious problems at the macro level.

As we noted earlier this week, a recent note from Morgan Stanley argued that growing political uncertainty globally has the potential to have a significant impact on consumer spending, particularly in the areas where major political events will occur or have occurred.

So if falling consumer confidence leads to a drop in consumer spending, it could signal serious problems for the UK economy.

As Emily Nicol, an analyst at Daiwa, notes:

“The evidence that Brexit uncertainty is dealing a severe blow to the UK economy is beginning to mount.

Consumers’ assessment of the future outlook for the UK economy was even more pessimistic than this headline measure, with the corresponding index falling to -29, a level not seen since late 2012 when GDP growth was negative. All of the other major components of the survey also recorded significant declines with a striking drop (the largest since the start of 2011) in the measure related to willingness to make major purchases.


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