Warning over hit to spending as Brexit dents confidence

Chief economists at Deloitte said the latest figures mark a turning point for the economy. Picture: Stefan Rousseau
Chief economists at Deloitte said the latest figures mark a turning point for the economy. Picture: Stefan Rousseau
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Uncertainty over Brexit is taking its toll on consumer confidence and raising concerns that businesses will be affected by a hit to spending next year, according to a report out today.

Consumer confidence in the UK in the last quarter is down on the previous quarter and the same period last year, according to the Deloitte Consumer Tracker.

However, strong levels of disposable income fuelled by relatively high wage levels are continuing to drive buoyant leisure spending. But the latest survey of more than 3,000 consumers revealed sentiment on job security, confidence around job opportunities and career progression are all down.

This comes at a time when businesses are intensifying cost control, with 70 per cent of chief financial officers expecting to reduce hiring in the next 12 months, according to Deloitte’s latest survey of financial leaders.

Ian Stewart, chief economist at Deloitte, said the latest figures mark a turning point for the economy.

“Up to now, we have seen a slowdown everywhere [apart from] in the jobs market and in the consumer economy. A decline in consumer confidence this quarter, combined with a fall in official unemployment figures, show that the period of remarkable resilience in jobs and earnings is coming to an end,” he commented.

“With Brexit cited as the biggest risk businesses face, the last quarter has also seen heightened concern over slowing growth in the UK and Eurozone, and chief financial officers are tightening their purse strings in response. The headwinds from a major global slowdown and uncertainty at home point to weaker growth ahead.

“As a result, 2020 is likely to see not only lower levels of consumer confidence but also a slowing down of consumer spending growth.”

The latest figures show that the leisure sector enjoyed particularly strong levels of spending in the last quarter, with nine out of 11 categories seeing year-on-year uplift, as consumers continue to favour experiences over material goods, such as shoes and clothing. This trend was seen across both small and big-ticket leisure categories, from gym and sports to eating out, and culture and entertainment.

Simon Oaten, partner for hospitality and leisure at Deloitte, commented: “Spending on short breaks and long holidays has remained flat compared to Q2, despite the seasonality of travel.

“However, we are seeing uplift across every other leisure category, from regular coffees to attending live sporting events, in a sign that experiences continue to be favoured over goods.”

But Oaten warned that consumers are entering the fourth quarter of the year in a “relatively cautious mood… whilst consumers have been quite resilient since the EU referendum, a deterioration in the jobs market could see some spending contraction”.