The YouGov/Cebr consumer confidence index was at 111.9 for the first three weeks of June but has slumped to 104.3 in the four days since the referendum result. The last time consumer confidence was this low was in May 2013, when it was at 102.9.
The index measures factors including job security, house prices, consumers’ personal financial situation, feelings around job security and activity in the work place. It found that all these factors have been impacted by the results, with concerns about house prices and the levels of business activity over the next 12 month.
Speaking to Marketing Week, Scott Corfe, director at the Centre for Economics and Business Research, said much of the slump is down to the uncertainty caused by the vote to leave the EU. However, he admitted the scale of the decline is a surprise given that half of the people who voted thought at the time that Brexit was a good idea.
“[The scale of the decline] would suggest there has been some adjustment in attitudes towards Brexit over a short space of time. If the half that voted to leave still thought it was a good thing you would think consumer confidence would have held up better. That suggests a change of mood once they saw the short-term impacts,” he said.
Given the decline in consumer confidence, those short term impacts are likely to include a drop in consumer spending.
“When consumer confidence declines, households tend to tighten the purse strings, save more and more spend less, particularly on big ticket items.”
Scott Corfe, director, Centre for Economics and Business Research
That is not good new for the economic recovery in the UK, which has been to some extent predicated on consumer spending. The decline is also expected to lead to a drop in ad spend – although Corfe believes brands could actually be better off spending more money on marketing.
“During a downturn we do tend to see a downturn in spending on advertising. It might sound perverse but actually if a business spent more in a downturn they could increase their market share plus the cost of advertising would be cheaper during that period,” he said.
Despite the slump, Corfe said marketers and businesses must put the decline in consumer spend into perspective. It is still nowhere near as low as the levels seen in 2008 and 2009 and while the Cebr says a recession “cannot be ruled out” it is not expected to be as long or as deep as in the late 2000s.
Key to improving the outlook for the economy and consumer confidence is coming up with a clear plan for leaving the EU, according to GfK’s head of market dynamics Joe Staton. Its monthly consumer confidence index, which asks for people’s views on the economic and their personal financial situation, as well as propensity to make a big purchase, found a “deepening pessimism” over the general economic situation and he expects that to slump further following the results.
“We can expect plenty of volatility in consumer confidence at least until Brexit negotiations are underway. The longer term mood will then depend on how smoothly those negotiations go,” he says.
“I’d be very surprised if we don’t see a strong trend downwards on people’s personal financial situation and the wider economic situation. It takes times to absorb a shock – and many are reacting to the Brexit decision with shock. It’s not Armageddon but nobody should expect an improvement at least until the new Prime Minister is appointed and Brexit negotiations have got underway.”