UK consumer confidence has fallen to its lowest level since the spring as coronavirus restrictions tightened across the country, pointing to a new downturn that threatens the survival of many businesses, particularly in the hospitality sector.
The GfK consumer confidence index dropped to minus 33 in November, two points lower than in the previous month and the lowest reading since May.
Consumers were particularly pessimistic about their financial situation, reflecting high uncertainty over jobs and business survival, which analysts said could point to weakening spending.
“People are clearly losing their nerve regarding their personal finances,” said Joe Staton, client strategy director at GfK. “This will deal a blow to any future rebound because bullish consumer spending fuels the UK economy and low confidence is the enemy of recovery.”
Consumer spending was the engine of the UK economic rebound in the third quarter, but falling consumer confidence and reduced spending opportunities as many businesses are shut, point to a new contraction in the autumn, usually the busiest period for many retailers.
The GfK consumer index was based on interviews conducted between November 2 and 13, covering the period when the lockdown in England started on November 5 but before the announcement of promising results for Covid-19 vaccines. It is calculated as a difference between the proportion of consumers reporting positive views minus those with negative opinions on their financial circumstances and on the country’s economic situation.
The figures were released as research from Fable Data, a company that tracks credit card transactions, showed UK consumer spending contracting 8.8 per cent in the week ending November 15 compared to the same period last year, marking a sudden reversal of the improvements seen over the summer.
The spending contraction was broad-based across sectors but was driven by plunging expenditure in bars and restaurants reflecting the closure to sit-in customers in England.
But while the restrictions resulted in rising grocery spending, “we are not seeing panic buying across the grocery sector, as we saw through the first lockdown period,” said Avinash Srinivasan, an analyst at Fable Data. Spending in restaurants and food delivery “performed better” than in the spring, possibly reflecting the presence of more takeaway and food delivery options.
Despite the ability to adapt to restrictions and social distancing measures, more than one in three businesses in the hospitality sector said they had little or no confidence that they would survive the next three months, according to separate data published by the Office for National Statistics.
This is the highest proportion of any sector, and double that across the economy.
Based on a survey of more than 5,000 businesses collected between November 1 and 15, the ONS also found that 44 per cent of businesses in the hospitality sector had cash reserves lasting only up to three months, the largest proportion of any sector.
Only 18 per cent of those businesses reported having cash reserves lasting for longer than six months.
Howard Archer, chief economic adviser at the EY Item Club, a consultancy, said: “These figures do fuel concerns over near-term job prospects . . . and they also suggest that a number of companies may still lay off workers despite the furlough scheme extension.”
Source: Economy - ft.com
