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Consumers and the Economic Outlook - UK - September 2019
Key Findings
 
“It is a confusing time for the British public. The new Government has been unable to agree a Brexit deal with the EU and Parliament has passed legislation obliging the Prime Minister to request a further extension if he cannot get one. Despite this, Boris Johnson has maintained his stance that the UK will leave the EU on 31 October, with a deal or without one.

The coverage of Brexit is another source of uncertainty. Depending on the newspaper they read, consumers can take Brexit to mean many different things. Even official statements about the anticipated effects are starting to fall on deaf ears as people have become weary after years of Brexit dominating national politics and the news cycle.

And yet, despite all this uncertainty, the things that affect people on a daily basis are fairly stable. Unemployment remains at a decades-long low and wages are rising above inflation. In general, those who want a job have got one and are seeing their spending power increase. As a result, Mintel’s consumer sentiment trackers are all at or around record highs.

With the new Brexit Day and a likely general election around the corner, however, it will be interesting to see how much longer consumer confidence can overcome the wider uncertainty.”
-Rich Shepherd, Associate Director – Financial Services

Uncertainty? What uncertainty?
In the minds of many commentators, the UK is in the midst of the most turbulent period in its post-war history.

The start of Boris Johnson’s premiership was defined by Parliament forcing anti-No Deal legislation upon him and thwarting subsequent attempts to call an election, and the controversy over his prorogation of Parliament ahead of a new Queen’s Speech on 14 October. At the time of writing, Brexit is just weeks away and there are no real signs of a deal being agreed between the Government and the EU. Despite the Benn Bill’s requirement for the Prime Minister to request a further Brexit extension if no deal is agreed with the EU by October 19 October, it is not guaranteed that this would be granted by the EU, leaving the prospect of a chaotic No Deal departure still on the table.

Yet consumers are overwhelmingly positive. All three of Mintel’s consumer financial sentiment indices have hit record highs since May 2019, while the financial activity index reached its highest level in August. And although there are signs of weakness in some consumer-facing markets, the Office for National Statistics reported that retail sales values in August were still 3.4% up compared to a year ago.

Consumers are sticking to what they know…
The scale of the uncertainty facing Britain means it is unreasonable to expect the average consumer to have anything even approaching a confident prediction about how Brexit will affect their finances in the future. Instead, people are reflecting on their own personal situations. On this front, there is reason for the optimism coming through on our financial confidence index.

With unemployment sitting at rates previously unseen since the 1970s and wages continuing to grow beyond inflation, consumers are positive about their prospects for the coming year. This is in part because they’ve felt the benefits of these factors over the last year. 31% say they are better off than last year, compared to 21% who are worse off. Our measure of annual change in financial situations has never been this positive. Looking forward, 37% are confident that they’ll be fine, while another 47% have some concerns but think they should be OK.

…but the next few months are key
Another likely factor driving the positivity seen in our research is Brexit fatigue. The fact that the withdrawal negotiations have dragged on for so long has inevitably seen at least some people switch off. At the same time, that politicians and newspapers continue to offer wildly differing views on what Brexit will mean has also desensitized many to even the most striking warnings.

This could all change quickly.

In the run-up to the UK’s initial departure date at the end of March, we saw a significant negative shift in Brexit-related sentiment. As we near the latest deadline at the end of October, we can expect Brexit to come back to the front of consumers’ minds. Add in the likelihood of a general election and people may well lose some of the positivity they have shown over the summer.

Key economic indicators
FIGURE 1: Key economic indicators, September 2019
 
| Period | Value
Annual GDP growth | Year to Q2 2019 | +1.2%
Unemployment rate | April-June 2019 | 3.9%
CPIH | August 2019 | +1.7%
Annual change in average weekly earnings (excluding bonuses) | Year to July 2019 | +3.8%
Bank of England Base Rate | August 2019 | 0.75%
Annual change in house prices (Land Registry) | Year to July 2019 | +0.7%
Value of retail sales (including fuel) | Year to August 2019 | +3.4%

Source: Office for National Statistics, Bank of England, Land Registry

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