UK consumer confidence flatlines as 2018 commences

Consumer confidence remained stagnant at the closing of 2017, despite improved household debt and disposable income sentiment. Both aspects of consumer opinion remain steadfastly negative, according to a new study, reflecting continued pressure on consumers – many of whom continue to have incomes below 2007 levels in real terms.

Political and economic uncertainties continue to grip, with government infighting in the UK regarding Brexit leaving businesses and consumers increasingly frustrated, as they are unable to plan for an uncertain future. This has seen numerous surveys suggest that consumer confidence is likely to have an impact on luxury and leisure spending in the near future, as households tighten their belts in turbulent times.

Now, new research from Deloitte into consumer confidence finds that it is stagnating, as consumers continue to have a net negative view. The percentage of consumers who said that their confidence did improve in the final three months of 2017, but still languished at a net score of -7. Confidence has picked up somewhat from the recent low-point at the half-way point of last year, but remains stubbornly in the net negatives, where it has been for more than six years.

Consumers’ net balance of confidence in the level of debt also remains negative, at around -3% net balance, up slightly from the previous quarter. The increase is partly a reflection of perceived improvement to their respective household disposable incomes, with two straight quarters of improvement to around a net -17%.

Ben Perkins, Head of Consumer Business Research at Deloitte, commented, “One important observation is that consumers are starting to show more confidence about their personal levels of debt. The hope is that this is a sign of consumers taking control of their debt, rather than an acceptance that it exists.”

Job security

Job security net balance has improved slightly across the second half of 2017, rising from around -6% in Q2 to -4% in the latest survey, as employment levels continued to reach record rates. However, while job security has improved, the research also shows that consumers are increasingly concerned about job opportunities / career progression, with a net -4% cited in the latest survey, down from less than -2% for Q3.

The survey shows that average wage growth was slightly above inflation for 2017, following two years of real wage decline – wages in the UK remain below the levels of 2007, with public sector workers particularly hard hit. One study found that private sector workers are out by more than 10%, while parity with 2007 is not expected until the mid-2020s. For public sector workers, continued austerity is likely to see real-wages decline further.

Perkins said, “On the surface, it is reassuring to see that there has been a quarterly rise in spending for both essential and discretionary categories. But if you scratch deeper then you quickly realise that inflation has been a key driver for the rise in essentials spending: consumers are buying the same but are paying more for it compared to a year ago.”

He added, “We typically see a dip in confidence in the final quarter of the year, with consumers being surveyed at a time when they are conscious of their spending levels and health after the festive period. So the fact that confidence has remained flat is a clear indication that the UK’s consumers are remaining resilient to spending pressures.”