Brexit fears drag UK consumer confidence to 18-month low, survey finds

Concerns about global economy’s future and UK’s EU departure weigh on shoppers’ minds, despite low unemployment

UK consumer confidence dropped to an 18-month low in the last quarter of 2018, as worries grew about Brexit and the clouds gathering over the global economy.

A poll of more than 3,000 consumers by YouGov for Deloitte showed confidence dropped to -9 per cent from -7 per cent in the previous quarter.

Inflation fell, real wages began to rise and unemployment remained at a more than four-decade low during the quarter, but this was not enough to counter uncertainty around the UK’s departure from the EU on 29 March.

Spending on essentials and discretionary items increased but growth was more muted than expected in the lead up to Christmas, Deloitte said.

Researchers looked at six measures: job security, job opportunities, disposable income, level of debt, children’s education and welfare, and general health and wellbeing.

Confidence was down, year-on-year, in five of these areas with the most pronounced falls seen for predicted levels of disposable income and job security.

The poll was conducted before news that Dutch authorities are in talks with 250 firms over moves to the country and a warning from Airbus boss Tom Enders that if no deal is reached the aerospace giant would be forced to look at shifting operations to the Continent.

Ian Stewart, chief economist at Deloitte, said that recent wage and employment data had delivered good news, “but consumers are more focused on Brexit worries at home and the clouds gathering over the global economy”.

China’s economy has slowed to its slowest annual growth rate in almost three decades while tensions are rising around tariffs on goods which risk damaging world trade.

Low confidence among shoppers was a key factor behind disappointing Christmas sales at Sainsbury’s, Marks and Spencer and Debenhams, among others.

Ben Perkins, head of consumer research, commented: “Based on the Tracker’s findings this quarter, it seems that consumers are anticipating bad times ahead, despite the backdrop of positive macro-economic data. Notably, spending fell across certain essential categories, such as housing or transport, and on big-ticket items such as electrical goods and furniture.

“Consumers have entered 2019 in a cautious mood. As a result, we expect spending to continue to slow, especially in the big-ticket discretionary categories.”

Brexit is already costing the UK’s public finances £17bn a year, according to a separate study released ahead of critical votes in parliament this week.

The amount would be sufficient to pay 10,000 more police to patrol the streets and train nurses to fill every vacancy in England, and still leave enough to cover the UK’s current contribution to the EU’s budget.

The research from the Centre for European Reform estimates the UK economy is 2.3 per cent smaller than it would have been had Britain voted to remain in the EU back in 2016.