Consumer confidence in the UK has fallen to its lowest level since the spring when coronavirus restrictions were tightened across the country, indicating a new downturn threatening the very survival of many businesses, particularly those in the hospitality sector.
The GfK consumer confidence index fell to minus 33 in November, two points less than in the previous month and the lowest value since May.
Consumers were particularly pessimistic about their financial situation. This reflected the high level of uncertainty about jobs and corporate survival, which analysts said could point to a slowdown in spending.
“People are clearly losing their nerve about their personal finances,” said Joe Staton, Client Strategy Director at GfK. “This will deal a blow to any future recovery as bullish consumer spending fuels the UK economy and low confidence is the enemy of the recovery.”
Consumer spending was the engine of the UK’s economic recovery in the third quarter, but falling consumer confidence and spending opportunities as many businesses are closed point to a renewed fall in the fall, which is usually the busiest time for many retailers.
The GfK Consumer Index was based on interviews conducted between November 2nd and November 13th, covering the period when the lockdown began in England on November 5th, but before promising results for Covid-19 vaccines were announced. It is calculated as the difference between the proportion of consumers who report positive views and the proportion of consumers who have negative opinions about their financial situation and the economic situation in the country.
The numbers came out when research by Fable Data, a company that tracks credit card transactions, showed that UK consumer spending fell 8.8 percent for the week ended November 15, compared to the same period last year, a sudden reversal of improvements in comparison to the previous year represents summer.
The decline in spending was broad-based across industries, but was driven by falling spending in bars and restaurants due to customer closings in England.
While the restrictions led to soaring food spending, “we are not seeing panic buying across the food sector as we saw in the first embargo,” said Avinash Srinivasan, an analyst at Fable Data. Spending on restaurants and food delivery performed “better” than in the spring, possibly due to the availability of more take-away and food delivery options.
Despite the ability to adapt to restrictions and social distancing measures, more than one in three hospitality companies said they had little or no confidence that they would survive the next three months. This comes from separate data published by the Office for National Statistics.
This is the highest proportion of all sectors and twice as high as in the entire economy.
Also, based on a survey of more than 5,000 companies collected between November 1 and November 15, the ONS found that 44 percent of companies in the hospitality industry had cash reserves of as little as three months, the largest proportion of any sector .
Only 18 percent of these companies said they had cash reserves that lasted longer than six months.
Howard Archer, chief economic advisor at consulting firm EY Item Club, said: “These numbers raise concerns about the near-term employment outlook. . . and they also suggest that a number of companies could still lay off workers despite the extension of the vacation program. “