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Consumer confidence in the UK continues to face headwinds, as real wage growth declines and Brexit uncertainties set in. New analysis into overall consumer sentiment for 2018 has found that after a brief rebound, net confidence has once again dipped.
Confidence in the UK economy has in recent years been raised as a key issue for both businesses and consumers, with uncertainties from geopolitical events from – Trump to Brexit – clearly impacting the UK’s floundering retail sector. This marks a noted departure from recent years, which had seen relatively strong economic growth and a ready supply of labour supplementing this, as rising employment offered up a growing number of waged consumers.
However, with employment now at a decades-long high, this stream of new revenue has begun to slow; meaning growth has once again levelled out, while those who have found employment have been hit by stagnating wages and a weak pound. The tail-end of the government’s eight year austerity programme is also cutting into social services, meaning many consumers are faced with choices between consumption and their basic welfare in terms of spending, as well as acute uncertainties about the future due to Brexit. Amid this, new analysis from Deloitte has explored the key trends in consumer confidence in 2018.
In the years following the financial crisis, consumer confidence had fallen to a net -18. Confidence climbed steadily since then, as the UK began its recovery, hitting around -6% by 2014. Since then, following a dip in 2016 and again in 2017, confidence in the first half of 2018 climbed to -4%, the highest level for the past eight years, before falling back to -7% in the latest figures.
Overall the research found that respondents remain on net balance, concerned about their relative household disposable incomes, at -19%, while the level of debt is noted at on balance -6%. UK consumers are also, on balance, in the negatives regarding job security, at -5%, which has seen a slight drop on the same period last year (-1%).
Respondents were relatively evenly split between positive and negative when it comes to job opportunities / career progression, at -1%. Worryingly, the respondents note that they tend to be more pessimistic than optimistic at their general health and wellbeing, at -13%.
One area of continuing pain for many consumers is the long-term real wage decline. Inflation has oustripped average earning growth for much of the decade since the financial crisis - except between 2014-2016. Now, inflation has once again come level with wage growth, eliminating any gains for workers despite record low unemployment. 
CFO confidence regarding the overall environment for business in the long-term following an exit from the EU is at its lowest point since the referendum, with 6% saying it will be better – 79% of respondents now say that leaving the EU will be worse, with the remainder expecting no material change.
Ian Stewart, Chief Economist at Deloitte, commented on the findings, “The reality of higher inflation and August’s interest rate rise has dented optimism about spending power. Meanwhile uncertainty and the manner in which the UK exits the EU in less than six months’ time is creating an additional headwind for consumers. The softening in consumer confidence has occurred against a backdrop of firmer UK activity and further falls in unemployment. That such consumer-friendly conditions have failed to boost confidence testifies to the headwinds from inflation, interest rate rises and Brexit.”
