Expect tough winter as UK consumer confidence tumbles, luxury could suffer
UK retail took a big hit on Friday with negative news on two fronts. Firstly, overall consumer confidence plummeted in October with GfK’s long-running index delivering worsening figures ahead of what could be a dismal Christmas selling period.
Meanwhile, luxury retailers won’t be welcoming a report that claims the UK suffered the “the biggest relative erosion of wealth” among the world’s leading economies this year and faced a “perfect storm” of the fallout from Covid-19 and Brexit, according to Credit Suisse.
But first those look-away-now numbers from GfK that showed this month’s consumer confidence fell a mighty six points to -31. All six measures in its report were also heavily down on corresponding figures released a month ago.
And it looks like there’s worse to come as GfK noted the prospect of rising unemployment “is severely depressing our outlook… expect the autumn chill to give way to much stormier conditions.”
Its Client Strategy Director Joe Staton said October’s figures showed there was “a worrying threat of a double-dip in consumer confidence as concerns for our personal financial situation and even deeper fears over the state of the UK economy drag”.
The body’s Major Purchase Index fell by six points to -27 in October, 28 points lower than it was in October 2019.
The Personal finances index over the last 12 months was down two points to -9, that’s 10 points below last October. The forecast for personal finances over the next 12 months is down one point this month at 0, also one point lower than last October. The Savings Index dropped six points to +14, seven points lower than this time last year.
Elsewhere, the measure for the general economic situation of the country during the last 12 months has fallen by six points to -67. That’s a whopping 34 points lower than 12 months ago. Expectations for the general economic situation over the coming 12 months are also down 12 points to -50, some 13 points lower than October 2019.
Staton said the downbeat figures came despite low inflation and rock-bottom interest rates, a buoyant housing market and a raft of government financial stimulus measures.
“Worryingly, this data was collected before the new round of Covid-19 restrictions came into force and the end of the furlough scheme, so this will negatively impact the Index in the run-up to Christmas and the months beyond.”
The report on the state of Britain’s wealth will also have luxury retailers shivering ahead of the all-important Holiday sales season. And news that wealth was growing in the US, China and India will be little comfort as the UK’s restrictions on international travellers will mean consumers from those countries will be spending elsewhere this winter.
Household wealth in the UK suffered the biggest hit of that in any of the world’s major economies this year with total wealth down to around $13.7 million from $14.6 trillion in the six months to the end of June, according to the Credit Suisse study that was reported in The Times.
Britain’s multimillionaires and billionaires also saw the heaviest decline of any country, it noted. The number of high-end net worth adults in the UK with assets of more than $50 million declined by 1,544 between the start of 2019 and the middle of this year. Britons also suffered an $18,340 decline in wealth per adult during the first-half of the year, the second biggest loss after Norway, and driven partly by currency movements.
By comparison, super-wealthy adults in the US rose 14,008 while China’s super-rich increased by 4,148 over the same 18-month period.
Global wealth stood at just over $400 trillion by the end of June, $1 trillion higher than at the start of the year and driven by China and India plus a recovery in North America. In China, Japan and South Korea, billionaires were estimated to be wealthier at the end of June than they were at the onset of the crisis.
“Among major economies, the United Kingdom may well be the biggest casualty of the pandemic,” Credit Suisse noted.
Report co-author Anthony Shorrocks said: “We’ve had an exchange rate devaluation and generally the pandemic has had a big impact on GDP as well.”
“The countries where billionaires have fared least well include Italy and the United Kingdom, both of which were badly affected by Covid-19, shackling firms across a broad swathe of industries,” Credit Suisse said.
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