Consumer confidence is likely to be hit after a Brexit with retail analysts warning of shoppers being deterred by the unstable conditions.
With an uncertain mood affecting the country, shoppers are likely to think twice about significant purchases and could tighten their purse strings until the impact of Brexit is fully understood.
“It will take some time before consumers have properly digested the result of the EU referendum”
Joe Staton, GfK
“Consumer confidence will be very fragile during a prolonged period of political instability,” said Maureen Hinton, Verdict’s global research director.
This instability will come as the timetable for the exit from the EU is clarified, the fall-out in the main political parties comes to a head and a possible general election looms, she added.
She believes consumers will be “wary of making big financial commitments, such as buying houses, until they have more confidence in their own personal economic prospects, which will hit the sale of big-ticket items in the home-related markets”.
Joe Staton, head of market dynamics at consumer analyst GfK, agreed consumers will be feeling uncertain.
He said: “It will take some time before consumers have properly digested the result of the EU referendum.
“In terms of UK consumer confidence, we believe there will be some short-term volatility, and that’s been immediately evident in the reaction of markets.”
Impact on big-ticket items
Diane Wehrle, insights director at Springboard, believes a Brexit could have an impact on spending on big-ticket items. “People will hold off for a few weeks – I’d imagine this weekend won’t be great for retailers,” she said.
“Big-ticket items have performed well over the last year, but that is probably going to slow down as a result of Brexit.”
Retailers affected by the state of the housing market could be particularly hit.
Hinton added: “Heavy share price falls at housebuilders already point to market concerns over house price falls and a slowdown in the number of transactions, which would lead to a contraction of sales at home-related retailers.”
However, Martin Harris, founder and boss of carpets and floors specialist Tapi, struck a more positive note for the property world. “My guess would be that there might be more support for first-time buyers and a cooling off in super-high-priced areas,” he said. “If that helps more people buy houses, that can only be a good thing for us.”
Consumer confidence in the long term could ultimately depend on the speed of political negotiations. Retailers may take some heart from the fact that European parliament president Martin Schulz has revealed a speeding up of a Brexit is already being assessed.
While there are factors retailers can’t control, one boss believes the onus is on firms to remain upbeat. “I think the key to confidence is it’s so much about the mood,” said Co-op group boss Richard Pennycook.
“It’s a responsibility of business generally, and retailers as the front face of business, to talk positively. The last thing we need is to talk ourselves down.”
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