UK consumer confidence slid sharply in the wake of the UK’s vote for Brexit last month and the UK’s housing market continues to suffer under the new regime of uncertainty the surprise vote ushered in. Separate figures also suggest that the London housing market ground to a halt in the run-up to the vote.
Pollsters GfK conducted a special post-Brexit survey following the surprise vote to leave the EU. The results didn’t make pleasant reading. The headline measure of consumer confidence slid 8 points to -9 in the first week of July, down from June’s -1. The drop was spread across all areas with the 2,002 people who were surveyed losing most confidence on the UK’s economic prospects over the coming 12 months.
“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.
When consumers lose confidence they tend to feel poorer which curbs their appetite to take financial risks or buy expensive items. The immediate response to Brexit appears to support this trend.
The GfK, which contacted Britons between June 30 and July 5, also reports that consumer confidence over making major purchases – which includes property and cars – fell into negative territory, hitting levels not seen in over 12 months. Details of the survey show a third of respondents said they expected prices to rise in the future, up from one-in-ten in the June survey.
Concerns over UK house prices have remained prevalent in the weeks following the vote with increased commentary over the number of home-owners choosing not to put their home up for sale and buyers requesting larger discounts when making an offer.
According to UK lender Halifax’s latest regional quarterly report, London’s housing market came to a complete standstill in the run up to the EU referendum. “This is the first time that prices have failed to rise in London since late 2012,” said Chris Williamson, report publisher Markit’s chief economist.
One possible response to Brexit and the uncertainty it has induced was that the Bank of England would cut interest rates to a fresh record low 0.25% when it made its announcement on July 14th. The Bank surprised markets and economists by voting to keep rates on hold at 0.5%, although it suggested rates could still be cut at the next meeting in August.
Expectations had been for the BOE to cut rates in order to support the economy and encourage lending and spending to continue. It’s likely that the faster than expected installation of a new Prime Minster in Theresa May and some calming of financial market turmoil stayed the Bank’s hand, for now.
In a statement accompanying the decision rates were held at 0.5% on a vote of 8-1 with the Monetary Policy Committee said: “Committee members made initial assessments of the impact of the vote to leave the European Union on demand, supply and the exchange rate. In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August.”