Consumers shrug off Brexit with confidence at five-year high

• Consumer confidence sees largest quarterly increase for 18 months;
• Optimism driven by confidence in job security, up six percentage points since Q2;
• London is less confident than the rest of the UK following referendum result;
• Consumer spending remains strong, with consumers prioritising leisure spending.

UK consumers have shrugged off post-referendum pessimism, with confidence rising to a five-year high in Q3 2016, according to the latest Consumer Tracker from Deloitte, the business advisory firm.

The quarterly survey of 3,000 UK consumers, which was carried out between 16 and 18 of September, has seen confidence rise by three percentage points from the previous quarter. This was the largest quarterly increase in confidence in 18 months, since Q4 2014.

Five out of the six measures which make up the confidence index have risen since the second quarter, with job security, job opportunities and career progression seeing particularly strong gains in consumer optimism. Confidence in job security rose by six percentage points compared to the previous quarter, after having fallen for the previous three consecutive quarters.

Significantly, London’s confidence is now lower than the rest of the UK. Consumer sentiment in the capital fell by three percentage points in Q3, and is now 9% lower than it was at the same period last year. Brexit uncertainty is a likely reason for this disparity, particularly due to the fact that voting patterns in the referendum showed that the majority of Londoners were ‘Remainers’.

Ian Stewart, chief economist at Deloitte, said: “In contrast to the business community, with Chief Financial Officers on the defensive following the EU Referendum, UK consumers have put Brexit fears to one side.

“Consumers are benefiting from favourable tailwinds, including low inflation, low unemployment and relatively high disposable incomes.

“In an inversion of the usual relationship London’s consumers are less upbeat than the rest of the UK. The Brexit vote may be weighing on a region in which 60% of the population voted to Remain and where reliance on financial services, migration and capital flows are especially strong.”

The Q3 Consumer Tracker also showed that consumer spending is continuing to shift from everyday essential items to more discretionary, non-essential categories. Spending on essentials, such as clothes and groceries, was flat for the second consecutive quarter. By contrast, net spending on discretionary categories rose by one percentage point.

Ben Perkins, head of consumer research at Deloitte, commented: “Consumer spending remains healthy, and has probably been boosted by the good weather and the country’s sporting success over the summer.

“The gap between leisure and retail spending is narrowing as consumers continue to prioritise spending on experiences, such as holidays and days out, rather than goods and services.

“With the consumer-focused economic fundamentals still showing few signs, if any, of a slowdown since the end of June, we expect retail sales growth to continue into the fourth quarter. Consumer spending power may be challenged in 2017 and beyond, particularly when faced by the prospects of higher inflation and the start of the formal Brexit process.”

End

Notes to editors

About the research
The Deloitte Consumer Tracker is based on a consumer survey carried out by independent market research agency, YouGov, on Deloitte’s behalf. This survey was conducted online with a nationally representative sample of over 3,000 UK adults aged 18+ between 16 and 18 September 2016.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.