Consumers and the Economic Outlook - UK - November 2019
Key Findings
 
“Brexit has been delayed again. The public faces a Christmas general election. And the economy narrowly avoided a recession in September. It is no wonder, then, that consumer confidence has taken a hit. However, financial well-being is holding up and the vast majority of people think they’ll be OK in the year to come.”
-Rich Shepherd, Associate Director – Financial Services

Brexit concerns have intensified
In a repeat of the trend we saw in the run-up to and ultimate extension of the March Brexit date, consumer sentiment about what Brexit will mean for the UK economy and their own finances fell sharply in October 2019 as the revised date approached.

When the previous extension was confirmed, we saw an upturn in sentiment. It is easier for people to be positive about Brexit when it is an abstract, relatively far-off issue. When it feels round the corner, consumers get jittery. Whether we will see a similar rebound in sentiment in the aftermath of the latest extension is not easy to predict, however. The general election announced for December introduces yet another source of uncertainty, while the campaigns will keep arguments about the perceived positives and negatives of Brexit front and centre, as well as raising broader questions about the future direction of the British economy.

Confidence is down but consumer finances are still holding up
All of the economic indicators that we track were lower in October 2019 than the August figures we reported in the last edition of this Report. Context is important here, as August saw each index reach the highest points on record or come close to doing so. Some decline from this was to be expected.

Having said that, the fall in consumer confidence for the coming year was stark, as the index dropped to levels last seen at the turn of the year. Increased concern and media debate about the prospect of a No Deal Brexit almost certainly played a part in this, but there are other reasons for consumers’ outlook to take a turn for the worse. GDP is still increasing on an annual basis but a quarter-on-quarter decline in Q2 brought the UK close to recession. This was only avoided by modest growth in initial estimates for Q3.

Despite consumers taking a more gloomy outlook at the year ahead, it is important to note that the vast majority still think they’ll be OK. More immediately, 76% of consumers described their finances as healthy or OK in October, while people are more likely to feel better off (28%) than worse off (22%) than a year ago.

How consumers respond in the coming months is difficult to predict. The next edition of this Report will be the first with the UK under a new government and potentially outside the EU. It will also come after the key Christmas spending period, a major test of how consumers really feel about their finances. 

Key economic indicators
FIGURE 1: Key economic indicators, November 2019
 
	Period 	Value 	
Annual GDP growth	Year to Q3 2019	+1.0%	
Unemployment rate	July-September 2019	3.8%	
CPIH	October 2019	+1.5%	
Annual change in average weekly earnings (excluding bonuses)	Year to July-September 2019	+3.6%	
Bank of England Base Rate	October 2019	0.75%	
Annual change in house prices (Land Registry)	Year to August 2019	+1.3%	
Value of retail sales (including fuel)	Year to September 2019	+3.4%	

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