Brands urged to ‘take action’ as consumer confidence hits 21-year low following Brexit
Consumer confidence has nosedived as a result of the UK’s decision to leave the EU, with the GfK’s headline consumer index score hitting a 21-year low.
In a special one-off report tracking the post-Brexit period of June 30 to July 5, the core consumer confidence index fell 8 points to -9. The GfK survey, which dates back to 1974, has not seen a bigger drop since December 1994.
British consumers’ propensity to make a big purchase also fell 12 points to -3, with major purchases such as holidays, clothing and electricals all expected to suffer as a result of Brexit.
There was an even steeper fall in consumers’ predictions for UK economy over the next 12 months, with the score falling a whopping 15 points to -29. In June – before the outcome of the referendum was clear – this index stood at -14. In theory, this means consumers’ fears around the UK economy chances over the next 12 months have almost doubled.
Earlier this week, the Bank of England warned there was evidence that risks it identified related to Brexit were emerging as governor Mark Carney admitted the “current outlook for UK financial stability is challenging.”
However, Joe Staton, head of market dynamics at GfK, believes both economic uncertainty could benefit brands that respond intelligently.
He told Marketing Week: “In times of uncertainty like the one we’re experiencing now, consumers look for certainty. Brands can provide that. Politics may be in turmoil, you may get less euros or dollars for your pound, but brands stay the same – from chocolate to soap powder, fashion to technology.
“What is key for brand owners is to make sure they understand how consumers are feeling, and look to make sure their offer is seen as helping them – from providing a pick-me-up to ensuring that whatever happens, brand quality never wavers,” he added. “Tracking those changes and matching them to your brand is a good starting point.”
Of the 2,002 consumers the GfK polled, 60% expect the general economic situation to worsen in the next 12 months, up from 46% in June. Only 20% of consumers expect things to improve, down from a level of 27% before the UK’s vote to leave the EU was confirmed on 24 June.
And the proportion of consumers who believe prices will “rapidly” rise over the next year jumped 20 points from 13% to 33%.
Staton warned: “Sectors such as travel, fashion and lifestyle, home, living, DIY and grocery are particularly vulnerable now as consumers cut back their discretionary income.
“As we’ve seen from previous periods of economic uncertainty, consumers turn to well-known brands they love and trust as a guarantee of quality and value for money.”
The latest figures are a sharp contrast to May’s index, when the GfK claimed Brexit concerns had failed to curb consumer spending.