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Following 4 interest rate rises in 10 months, continuing concerns about pension deficits, rising inflation and seemingly no abate in fuel costs, British consumer confidence has weakened significantly according to a survey released today by market research company, Nielsen.
The survey, part of Nielsen Global Consumer Confidence Survey which asks over 26,000 consumers across the world their opinions about their personal finances, job prospects, spending ability and concerns has run since 2004 in the UK and consumer confidence is now at its lowest since then.
Eleni Nicholas, Managing Director ACNielsen UK & Ireland commented, “A number of factors have combined recently with the effect that consumers are beginning to feel the squeeze on their finances. April and May have both been reported as a poor trading months in the wider retail sector and certainly, Nielsen’s grocery market sales monitor has seen a slowdown in growth in this sector. Combining this evidence with our survey results we would say that consumers are entering a period of reduced confidence.”
Feelings about personal finances and job prospects have shifted with half of respondents feeling that job prospects today are ‘not so good’ or ‘bad’ and similarly, personal finances are judged as being ‘not so good’ or ‘bad’ by 49% of those asked. Nielsen can report a 42% increase in respondents rating job prospects as ‘bad’ as versus six months ago and a 71% increase in the number of people feeling personal finances are bad versus 6 months ago.
Reluctance to Spend
There is solid evidence to suggest that consumers are becoming more reluctant to spend. Ms Nicholas continued, “It seems that the spend now, pay later mentality has received a reality check as consumer debt continues to mount. Results from our survey indicate that 50% more people believe that now is a ‘bad’ time to spend money on things they want or need than 6 months ago.” 15% of those asked said they thought now was a ‘bad’ time to think about spending versus 10% when the survey was polled in October 2006 and a historical average of 9%.
Now is a Time to Save
And, in line with this, when asked about what they spend spare cash on, consumers appear to have cut back on discretionary items such as ‘new clothes’, ‘technology’ and ‘out of home entertainment’ in favour of ‘savings’, ‘investments’ and ‘retirement funds’. In October 2006, 83% of consumers said they spent spare funds on clothes, technology and entertainment and in May 2007 only 71% said they did, a 12 point drop – in contrast, savings, investments and pension funds were cited by 43% of people in Oct 2006 jumping to 52% in the latest survey.
Ms Nicholas continued, “Our survey would indicate that consumers are beginning to rein in their spending and instead are turning to saving for the future. This is exactly the desired outcome that the Bank of England would have hoped for on the back of the recent interest rate rises.”
In fact, ‘savings’ was the second most popular way UK respondents said they utilised spare cash in the latest survey with 37% of people citing this – traditionally this has ranked lower. For comparison, in October 2004, 27% of respondents cited this and it ranked behind holidays, paying off debts, entertainment and new technology. Now only spending on holidays takes precedence over this with 38% of respondents saying they use their spare cash for this purpose.
Ms Nicholas added, “Whenever we conduct a consumer confidence survey, ‘holidays’ are cited as one of the top ways consumers will spend their spare cash. It seems that while people are willing to cut back on clothes and gadgets, in these times of long hours and hard work, taking a break from our day to day responsibilities is ever important to us.”
Interesting to note, 21% of UK respondents answered ‘I have no spare cash’. This is at it’s highest since the survey began and the UK came second highest in Europe - after only depressed Portugal – and third highest globally with respondents claiming they have no spare cash. The European average was 14%. For comparison, only 8% of our neighbours in Ireland said they have no spare cash.
Crime Concerns Escalate
The survey also tracks consumer concerns over the next 6 months and in a climate of regular headlines reporting on teenage gun crime and stabbings, our concerns about crime have shot up. “Crime has been cited as a major concern. 19% of respondents said it was a concern six months ago but this has shot up to 28%. This is a significant shift.”
Our main concern is still health with 31% of respondents being concerned about their health or health in general. Terrorism has regularly featured as a major concern but in the latest survey this has fallen back somewhat to 5th major concern with 21% now choosing this as either a first or second concern as opposed to 26% 6 months ago. Number of respondents with concern over Global Warming has risen 1% point to 15% since October 2006. Nielsen believes this relatively low rate can be attributed to the fact that people are asked about their major concerns over the next 6 months and that the majority still see Global Warming as a problem for the future.
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions and recognized brands in marketing information (ACNielsen), media information (Nielsen Media Research), business publications (Billboard, The Hollywood Reporter, Adweek) and trade shows. The privately held is active in more than 100 countries, with headquarters in Haarlem, the Netherlands, and New York, USA.
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