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News - 1 February 2011

Shops will suffer as nation runs out of cash

As pressures on personal budgets mount, the proportion of people saying they ‘have no spare cash’ has risen to 27%.

The latest Consumer Confidence Survey, released on Wednesday by The Nielsen Company and the British Retail Consortium (BRC), shows that the proportion of people saying they ‘have no spare cash’ was six percentage points higher at the end of 2010 than it had been a year earlier and the highest since the survey began to track  this in 2005.

The poll also revealed that consumer confidence overall was lower at the end of 2010 than the beginning, though there was a marginal increase in sentiment in the final quarter.

Compared with the previous quarter, the Consumer Confidence Index rose two points to 77 in Q4.  The rise can be directly attributed to three factors:

  • consumers felt slightly more positive about their job prospects
  • consumers felt slightly more positive about their personal finances
  • consumers felt less negatively about spending 

There was a two percentage point increase in the number of respondents who said they thought job prospects would be ‘excellent’ or ‘good’ in the coming 12 months (to 22%) and a one point increase in the number of people who believed that their personal finances will be ‘excellent’ or ‘good’ in the coming year (to 35%).

There was also a six point drop in the number of people saying they thought now was a ‘bad’ time to spend. However, the survey was polled in the run up to Christmas and this uplift is likely to be a seasonal fluctuation rather than the start of a fundamental change of mood.

Furthermore, 82% of consumers still believe Britain is in recession. Throughout 2010, this figure hovered consistently between 82% and 84%.  Only 14% believe Britain will be out of recession within 12 months, the lowest figure of the year.

Main Concerns and Spending

Increasing utility bills have become the number one concern for the coming months, overtaking the economy. With new record high petrol prices, more people are also worried about rising fuel bills. Concerns over food prices, jobs and debt continue to feature highly.

Fewer people said they were spending disposable income on holidays, on clothes, home improvements, new technologies and investments and the number of people saying they are saving dropped from 34% to 31%. More people claimed to be paying off debts and credit cards with spare cash. 

Strategies to Save

The survey found that 65% of consumers intend to make savings on new clothes (up from 59% in Q3). The other top money saving strategy was trying to save on gas and electricity bills, also mentioned by 65%.

Chris Morley, Group Managing Director of Nielsen UK & Ireland commented,  “There is no doubt that many consumers are under a lot of financial pressure and little wonder why over a quarter feel they have no spare money what-so-ever.  Looking forward into 2011, discretionary expenditure is expected to be squeezed harder with household income for most shoppers unlikely to keep pace with the rising cost of living.  We anticipate a consumer who continues to feel the pinch, who has major concerns about meeting the cost of essentials and basic living expenses - such as food, household bills and fuel - and a consumer who will continue to employ strategies to make savings.”

British Retail Consortium Director General Stephen Robertson said, “I’d be surprised if this modest improvement in sentiment lasts. With Christmas coming, many people put their concerns to one side. Worries about jobs and money may briefly have seemed a bit less pressing. The impending VAT rise certainly made people less pessimistic about buying larger items.

“But the signs are that this boost hasn’t survived the extreme weather, VAT rise and revival of nervousness about spending cuts.

“The survey shows mounting worries about household costs, an unshakeable belief that we are still in recession and record numbers with no spare cash. A significant and permanent strengthening of consumer confidence is clearly some way off.”

The survey forms part of the Nielsen Global Consumer Confidence Survey which saw 25 out of 52 countries polled loosing confidence in Q4.  Despite Britain’s slight improvement in confidence since Q3, confidence levels here remain lower than the global average of 90 but higher than troubled neighbour, Ireland, whose confidence levels fell 3 points to 65 in Q4.

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