UK consumers remain largely undeterred following the UK’s decision to leave the EU and rank Brexit as the sixth on their list of concerns, according to new research from Deloitte.
Consumers appear to be more concerned by issues that are influenced by the Brexit decision, including the economy (ranked second) and rising inflation (fourth).
The latest Deloitte Consumer Review: The Brexit Consumer surveyed 1,644 UK consumers in an attempt to understand how Brexit will impact consumer confidence and sentiment, and whether consumers feel it is affecting their finances.
Do consumers care about Brexit?
Across all respondents, just over half (53%) say they are concerned about the UK’s vote to leave the EU/Brexit. Consumers are more concerned about the state of the NHS (85%), the environment (64%) and funding for retirement (54%). Significantly, consumers are also more concerned about the health of the economy (68%) and rising inflation (56%) – issues that directly impact disposable income and spending power, and will be influenced by Brexit.
The top three concerns for consumers who voted Remain are the state of the NHS (91%), Brexit (83%) and the health of the economy (82%). For those who voted Leave, the top three concerns are the state of the NHS (83%), followed by the health of the economy (57%) and the environment (53%). Brexit was the eight-biggest concern for those who voted Leave.
David Noon, UK & Global Brexit lead at Deloitte, comments: “Consumers drive the UK economy and have so far shown resilience to the uncertainty surrounding Brexit. This survey paints a mixed picture in terms of how consumers feel Brexit has impacted on their finances.
“Brexit ranks low in terms of consumer concerns, in contrast to our recent CFO Survey, which found that Brexit was considered the number one risk for business. With March 2019 drawing closer, continued uncertainty could weigh heavier on consumers and so it is reassuring to see that discussions around the UK’s financial settlement appear to be concluding as it is crucial that we enter the next phase of the negotiations as quickly as possible.”
Brexit and the impact on future spending
According to the research, UK consumers are mixed about how Brexit has changed their financial situation. Just over a third (36%) of respondents believe their personal finances have worsened since the referendum, whereas 61% felt their situation has either stayed the same or improved.
Expectations are similarly split between those who voted Remain and Leave at the EU referendum. 65% of Remain voters believe their future personal finances will be negatively impacted by Brexit, but 63% of Leave voters expect either positive or no change.
Unsurprisingly, consumers who voted Remain expect Brexit to have a negative impact on their spending because the majority (65%) expect goods and services to become more expensive. Similarly, consumers who voted Leave do not appear to be concerned about the impact of Brexit on their spending, because only 26% expect to see an increase in prices.
Ben Perkins, Head of Consumer Business Research at Deloitte comments: “These polarised views highlight a fundamental challenge for businesses as they attempt to navigate a consumer landscape in which one half of the country expect to see a different outcome to the other.”
Sector specific challenges
Across all categories, consumers are most concerned about the rising price of holidays, with almost two-thirds (63%) of respondents believing that leaving the EU will increase the cost of holidays. This was followed by food and non-alcoholic drink (55%), alcohol and tobacco (49%), clothing and footwear (47%) and transport (45%). On average there is a 40% gap between the proportion of consumers who voted Remain and Leave which expect prices to rise.
Perkins added: “Consumer businesses face Brexit-related risks that could impact the consumer in the form of price increases and decreased availability if they do not prepare for these pressures.
“As a result, consumer businesses will be considering the impact that passing on any Brexit-related costs to their customers could have on overall consumer spending. However, in such a finely-balanced consumer market, businesses hoping to pass on increased costs to their customers cannot predict how consumers will respond.”
The research found that, since the EU referendum, consumer confidence and spending has remained broadly resilient despite rising inflation and a squeeze on disposable income. However, while the majority of respondents do not expect Brexit to impact them negatively, there is a significant minority that have concerns over the potential negative outcomes associated with Brexit. Uncertainty about how Brexit will impact the consumer presents additional challenges for businesses operating in the retail, consumer product, automotive, travel, hospitality and leisure sectors.
Noon concluded: “Brexit is a business risk like any other – one which can be planned for and managed. Whilst risk mitigation is likely to dominate the business agenda in the near term, consumer businesses should also consider what opportunities Brexit might present, whether that be in optimising supply chains or expanding e-commerce platforms, for example.”