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Consumer confidence and financial wellbeing in March 2022

Summary

  • Confidence in both the future of the economy and future household finances dropped dramatically in March, to -64 and -40 respectively.

  • Incidence of financial difficulty continues to increase. 54% of consumers made adjustments to cover essential spending in the last month and 7.6% missed at least one housing, bill, loan or credit card payment, compared with 5.9% in March 2021. 

  • More than half of those who reported missing a bill payment said they had missed more than one.

Consumer confidence takes a dramatic turn for the worse

The Which? Consumer Insight Tracker shows that confidence is dropping rapidly as the cost of living continues to rise and the conflict in Ukraine creates additional economic uncertainty. Despite strong recent economic growth, consumer confidence in the future of the UK economy fell dramatically in March. Just 10% think the economy will improve over the next 12 months, and 74% think things will get worse, giving a net confidence of -64. This compares to -19 just last month and is the lowest since 2020, in the earlier stages of the Covid-19 pandemic. 

The recovery from the Omicron surge likely contributed to economic growth in January 2022, with retail and eating out being some of the drivers of this growth. However, this growth will not persist if consumers lack the means or the confidence to spend. Major increases in the cost of living are likely dampening down confidence among consumers as we head into the spring. The war in Ukraine is also a likely contributing factor, with the chancellor warning last week that the conflict will lead to economic uncertainty in the UK. 

Confidence in future household finances also dropped significantly to -40 compared to -21 in February (which was already much lower than at the end of 2021).  This confidence level equals the unprecedented low seen in March 2020, just as the first national lockdown was announced (-43), with consumers clearly anticipating that the state of the economy will affect their own finances. This measure dropped.  

Sharply rising prices may be a particular problem for retired people since they are more likely to have a fixed income, and we find that the retired are very pessimistic about the future of their household finances. Those in work may be able to react to higher prices by working more hours, seeking a better paid job or perhaps even haggling for a pay rise. The current strength of the UK labour market should help all of these actions, but wages are falling in real terms and we found that confidence in future household finances fell sharply among those in work in March, particularly those working part time.

Households remain under financial pressure

Dropping confidence aside, our March data shows a continuation of the increased financial difficulty seen among households in January and February.  More than half of consumers (54%) reported having made an adjustment to cover essential spending in the last month. Increases in the proportion who have cut back on essentials (35%) or dipped into savings (26%) are driving increases in this measure. One in ten (11%) had used an overdraft facility and 9% had borrowed money from friends and family. The 54% seen in March is only a slight increase on last month (52%) but continues a long term upward trend and is much higher than at this time last year (38%).

A smaller but increasing proportion of consumers are under more severe financial pressure. 7.6% of consumers said that their household had missed a housing, bill, credit or loan payment in the last month in March. Again, this continues an upward trend and compares to 5.9% in March 2021. 

Rent and bills were the most common types of missed payment, with 6% of renters missing their rent payment and one in twenty (5%) of all consumers saying their household had missed a bill payment. The most common types of missed bill were energy bills (2.5%), phone bills (2.6%) and water bills (2.3%). 1.7% had missed a council tax payment and 1.4% had missed a broadband bill. Six in ten (61%) of those who reported missing a bill payment said they had missed more than one. This highlights the extreme pressure that some households are under, finding themselves missing multiple bill payments in the space of a month amid the mounting cost of living.

Contact us

If you have any questions or would like to find out more, please email Sophie Beesley at consumerinsight@which.co.uk

Published on 22.03.22

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