Britain's exit from EU batters UK consumer confidence
LONDONJul 09, 2016 - 12:00 am GMT+3
Jul 09, 2016 12:00 am
British consumer confidence suffered one of its biggest drops in 21 years and the country's largest department store expressed concern over the pound's fall, in the strongest evidence to date of the challenges Britain's economy faces after the Brexit vote.
The vote to leave the European Union has thrust Britain into its worst political crisis in modern times. Investors have warned that what was ranked as the world's fifth largest economy faces years of uncertainty over everything from trade to investment.
In a special post-referendum survey published on Friday, market research company GfK said consumer confidence fell 8 points to -9 in the aftermath of the June 23 vote from -1 in its previous regular monthly survey.
"During this period of uncertainty, we've seen a very significant drop in confidence, as is clear from the fact that every one of our key measures has fallen," said Joe Staton, Head of Market Dynamics at GfK.
The last time the index, which dates back to 1974, fell so steeply was in January 2011, and the last time it fell more was in December 1994.
Moody's credit rating agency said on Friday Britain faced a shock to confidence and almost halved its UK growth forecast for next year to 1.2 percent from 2.1 percent. Moody's also cautioned that the Brexit vote could potentially threaten the existence of the EU, which has a $16.5 trillion economy.
"The potential strengthening of nationalistic and protectionist movements could have a detrimental effect on the EU, even threatening its existence," the credit rating agency said. It expected global spillovers to be limited, however.
GfK reported that people who wanted to stay in the EU - 48 percent of those who voted -- were much more pessimistic than the 52 percent who voted to leave.
"Our analysis suggests that in the immediate aftermath of the referendum, sectors like travel, fashion and lifestyle, home, living, DIY and grocery are particularly vulnerable to consumers cutting back their discretionary spending," said Joe Staton, head of market dynamics at GfK.
About the author
Research Associate at Center for Islam and Global Affairs (CIGA) at Istanbul Sabahattin Zaim University