As the British public await details of Theresa May’s draft withdrawal agreement with the EU, KPMG has today (14 November) released its latest findings on consumer confidence.
Explaining the findings, Simon Jones, KPMG’s senior partner for Cardiff said:
“With negotiations going to the wire, the public are braced for a choppy Brexit. A majority continue to believe we’re heading for no deal, and even those who don’t, still think economic disruption is on the cards. Consumers have long felt gloomy about Brexit, but now we’re seeing people act on those emotions with around a third of the public reporting they’ve already cut their spending.
“Brexit is often presented as if it will happen at our ports and in the City. In reality some of the biggest effects will be felt in our shops, cafés, travel agents and garage forecourts. More businesses need to prepare for turbulence and also be ready to capitalise on any spike in consumer confidence a good deal unleashes.”
UK consumers say that they have already reduced their spending in the following areas because of Brexit: spending on everyday items such as shopping travel and regular bills (31%), non-essential items such as entertainment and eating out (34%), luxury items such as designer clothes and holidays (38%), major purchasing or investment decisions such as new cars home extensions or moving house (38%).
In the event of No Deal consumers believe the following supermarket categories are likely (or very likely) to become more expensive: Wine spirits and steak (65%), fruit and veg’ (62%), fish and seafood (58%), meat products (56%), the Christmas shop (53%), and everyday essentials (53%).
In the event of a No Deal Brexit UK consumers said they were likely or very likely to cut spending in the following areas: Buying a new car (58%), designer goods and jewellery (43%), travelling and holidays (41%), eating out (41%), home technology (39%), home improvements (39%), leisure activities (38%), clothing (38%), and household appliances (38%).
Paul Martin, UK Head of Retail at KPMG UK, said:
“Consumers are increasingly concerned about rising food prices, which are likely to become a reality if a no-deal Brexit occurs. People may want more British produce but supply naturally poses a challenge, especially as consumers have become accustomed to fresh produce all year round. As our monthly BRC-KPMG retail sales monitor has highlighted, retail price increases result in consumers clawing back on non-food items, especially bigger ticket discretionary items such as cars, kitchens or furniture, to accommodate for essentials like food until the longer-term picture becomes clearer.”
Linda Ellett, UK Head of Consumer Markets at KPMG UK, added:
“The run-up to Christmas is a crucial time for consumer businesses, with some generating as much as 80% of their annual profit in these months alone. Nearly a third of consumers said that they’ve already cut their everyday spend; even more are spending less on luxury items, and over half anticipate higher prices if a no deal Brexit becomes a reality, so a lean Christmas could lie ahead. Consumer businesses must adapt to continue to attract spending consumers, otherwise they’ll encounter a severe Christmas hangover.”
The UK population continue to believe that leaving the EU without a deal will be bad for the UK – 45% think it will be bad for the country and 23% think it will be good for the country (45% and 25% in August). However Brits believe Brexit will have a more positive effect on the UK economy in the longer term: 22% think Brexit will be positive in theweeks after exit, 33% think Brexit will be positive in the year after the UK leaves, and 47% think Brexit will be positive 5-10 years after the UK leaves. This compares with 18%, 30% and 45% respectively in KPMG’s August poll.