Growing worries about the economic outlook have dented the confidence of UK households and manufacturers, according to the latest reports to suggest the Brexit vote result will slow the economy.
A poll by market researchers GfK recorded the biggest slide in consumer confidence for more than 26 years in July. The group said people were on average gloomier about their own finances, the broader economy and whether now was a good time to make big purchases such as furniture and household appliances.
A separate survey of manufacturing companies, also published on Friday, paints a similar picture. Manufacturers’ organisation EEF said that the sector’s recovery was under threat as its poll revealed business confidence had fallen in every region of England and Wales.
The GfK report on household reactions to the Brexit vote adds to evidence that consumers could rein in spending amid higher uncertainty about jobs, pay and the UK’s economic health.
The headline confidence index fell to -12 in July from -1 in the June survey carried out before the referendum. That was the sharpest month-to-month drop since March 1990, shortly before the UK fell into recession.
The latest result was also weaker than a reading in a one-off post-referendum GfK poll of -9 conducted from 30 June to 5 July.
The researchers, who surveyed 2,000 people for the full report between 1 and 15 July, said the outlook for consumer confidence would depend on how quickly the UK’s trading position is clarified.
“Consumers in post-Brexit Britain are reporting higher levels of concern this month,” said Joe Staton, head of market dynamics at GfK. “We’ve seen a very significant drop in confidence, as is clear from the fall in each of our key measures, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months.
“However, the index continues to remain at a relatively elevated level by historic[al] standards. Its future trajectory depends on whether we enter a new period of damaging economic uncertainty or restore confidence by embracing a positive stance on negotiating a new deal for the UK.”
The poll showed people were gloomier about their current and future personal finances and about the current and future state of the UK economy. Some of the results will have been collected before Theresa May became prime minister on 13 July and appointed a new cabinet, so ministers will be hoping a return to some political stability could improve confidence readings in coming months.
The report follows a clutch of business surveys this week suggesting the vote to leave the EU could derail Britain’s economy following relatively strong economic growth in the run-up to the referendum. GDP was revealed to be up 0.6% in the second quarter, greater than the 0.4% growth seen in the previous three months, but more timely indicators pointed to falling confidence among car factories, high street stores and in the construction industry.
Manufacturing group EEF has added its voice to that gloom on Friday. Its overview of business confidence among factory bosses found optimism dropped most sharply in the south-east England and London region and in Wales. The smallest decline in confidence was among firms in the north-east England, according to the survey carried out with accountants BDO.
The poll of 410 firms found that UK manufacturers’ average confidence score just before the referendum was 6.37 out of a possible 10 points, and had declined to 5.24 following the vote.
“The Brexit vote has put the manufacturing sector’s recovery in jeopardy,” said Lee Hopley, chief economist at EEF.
She noted that despite suffering the largest fall, the south east England and London region still ranked top in the UK for business confidence while the north-west England and the east Midlands had the lowest scores.
“The growth path is now uncertain in all regions and, while firms in the south-east and London and Wales look better placed to ride the storm, companies in the eastern counties, north-east and the south-west appear more downbeat about their ability to cope,” Hopley said.
Exchange rate volatility, political uncertainty and the prospect of increased costs on the back of a weaker pound were all causing concern for manufacturers, the lobby group said.
“With a solid business environment, supportive policies and the right outcome from Brexit negotiations allowing for trade and ongoing access to skilled workers, manufacturers should be able to overcome the risks, reap future growth rewards and get their business confidence back on track,” it added.
Tom Lawton, manufacturing head at the report’s co-author, BDO, said there had been encouraging signs from the new government of support for the sector.
“The lack of a clear strategy for the manufacturing sector over recent years has been of huge concern and it is encouraging to see Theresa May’s promise of a proper industrial strategy,” said Lawton.
“We would like to see the government match manufacturers’ long-term outlook by developing a 15 to 20 year industrial policy that avoids the disruptions of the political cycle.”
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