Consumer confidence collapses amid the coronavirus crisis
Consumer confidence in the future of the UK economy has collapsed following the outbreak of COVID-19. When asked whether the economy would be better or worse in 12 months time, consumer confidence fell from -17 points in February 2020 to -78 in March 2020.
Consumers of all types of working status are now expecting their household finances to worsen over the next twelve months.
The coronavirus crisis had not yet resulted in greater incidence of financial difficulty at the time of our March survey, but a large number of consumers were already reporting indicators of pre-existing financial difficulty.
This note summarises the main findings from the March wave of Which?’s Consumer Insight tracker survey. This was an additional wave with a reduced number of questions that were focussed on the impact of the COVID-19 outbreak on consumer confidence and financial wellbeing. The fieldwork was conducted by Populus on behalf of Which between 20th and 22nd March 2020. A nationally representative sample of 2,081 consumers was surveyed.
The outbreak of COVID-19 has caused an unprecedented fall in consumers’ confidence in the UK economy. After a gradual decline since the Brexit referendum in 2016, net outlook on the future economy had begun to improve late last year and confidence in February had been higher than at any point in the previous 18 months. However, in March only 7% of consumers said they believed the UK economy would be better in 12 months, while 85% expected it to be worse. This gave a net confidence of -78 points, down from -17 in February 2020.
The impact of COVID-19 has affected the confidence of all consumers and this has largely wiped out previous differences in confidence between those who voted to remain in the European Union and those who voted to leave. There was a stark contrast between the outlook of these two groups in February 2020. Remain voters were much more pessimistic about the future of the UK economy, with net confidence at -56, while for leave voters this was +24. However, the confidence of both remain and leave voters dropped further in March, to -87 and -72.
Consumers of all types of working status are now expecting their household finances to worsen over the next twelve months. The difference between outlook on current and future household finances is greatest for the retired, but part-time workers are the most likely to expect their household finances to worsen over the next 12 months. This may well reflect that some of the sectors expected to be most affected by economic consequences of COVID-19 are also those that have a greater proportion of part-time employment, such as retail and accommodation and food services.
The level of financial pressure experienced by households in March was consistent with that found in previous waves of our Consumer Insight survey. However, these numbers do indicate that a large number of consumers were already taking measures indicative of financial difficulty in recent months, and therefore may be particularly vulnerable to the economic consequences of the crisis.
About a third (34%) of those surveyed in March reported having cut back spending on essential items or taken money from savings to cover the month’s spending, while 7% of consumers reported having defaulted on a bill or housing cost.
These indicators of financial difficulty vary significantly across demographic groups and imply that some groups may be less resilient to the current economic crisis. Younger respondents are more likely to have pre-existing financial difficulty, with 13% of those aged 25-34 reporting having defaulted in March, which compares to just 1% in the over 65s. Unsurprisingly, those not working but seeking work, temporarily unemployed or sick were much more likely to report having defaulted (13%), while default rates were also above average for this working part-time (9%). Those with at least one child under 18 living with them were also more likely to report having defaulted (12% versus 5% of those without a child under 18 living with them).
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