Wary shoppers cut back their spending

ALMOST a third of British shoppers say they have no spare cash in their pockets to spend on non-essential goods, according to the latest consumer confidence survey from the British Retail Consortium (BRC).

It showed a rise in confidence in the second quarter of this year, but experts warned the increase - which takes consumer sentiment to only the same level it was at when Britain was in the depths of recession - may prove short-lived, with people's intentions to spend stuck at an all-time low.

Rising utility bills, uncertain economic conditions and increasing fuel prices over the next six months meant three-quarters of consumers had been forced to make changes to their spending habits to ensure they could afford the basics.

Two-thirds of those surveyed had switched to budget grocery brands rather than their usual choice. Some 35 per cent said they were confident about the state of their personal finances - up from 29 per cent in the first three months of the year - but 60 per cent remained gloomy.

"The squeeze on disposable incomes is getting tighter," said BRC director general Stephen Robertson. "A third of people said they have no spare cash - a new record high.

"Weakness in the economy and rising utility, fuel and food bills top consumers' concerns for the next six months. Even after paying out for essentials, households that do have spare cash are choosing to pay off debts and build up savings rather than spend on the high street."

He went on: "Competition within the sector is helping to take the edge off price inflation, with a larger number of promotions and discounts on offer. Against this backdrop, the small increase in consumer confidence is encouraging, but retailers won't be expecting to benefit from it for some time yet.

"We're unlikely to see a sustained rebound in consumer confidence until genuine signs of a strong economic recovery gather momentum."

The official measure of consumer confidence rose by five points in the second quarter to 72, as 19 per cent of consumers said they were now optimistic about their job prospects for the coming year. Any figure below a baseline of 100 indicates overall pessimism. The UK's figure is on a par with that of Europe, where confidence levels are at 74.

Chris Morley, UK & Ireland managing director of Nielsen, which co-authored the report, said: "Shoppers are once again cutting back on everyday necessities. At the supermarket, for instance, our survey tells us that people are re-adopting a strategy of switching to cheaper grocery brands to help stay within budget. This is now an acceptable compromise which many plan to continue when economic pressures ease."

Worldwide, consumer confidence declined to its lowest level in six quarters, 89, boosted by higher levels in the Asia Pacific, Middle East and African regions.