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Reuters
LONDON
British consumer confidence plunged during the political crisis sparked by Prime Minister Theresa May's election flop, hitting the sales of general retailers such as Debenhams just as shoppers'spending power is undermined by the pound's fall.
Two major surveys showed confidence among British consumers and retailers had fallen back to levels last seen in the wake of the shock 2016 Brexit vote which thrust Britain's $2.5 trillion economy onto an uncertain path.
Polling firm YouGov said it expected economic growth to fall sharply over the coming months while the Confederation of British Industry said retailers were downbeat about July.
The tension could be felt on the high street, where the second-biggest department store group, Debenhams, warned that trading had turned volatile.
"We have seen an increase in customer uncertainty caused by the overall environment and that has an impact on categories that are related to disposable income,"Chief Executive Sergio Bucher said, as clothes sales proved particularly weak.
British consumers have been hit by a sharp rise in inflation, caused in large part by the fall in the value of the pound since Britain voted last June to leave the European Union, and by a slowdown in wage growth.
"But the real cause for alarm will be the cooling of the property market, as this is one of the key things that has propped up consumer confidence over the past few years,"Stephen Harmston, head of YouGov Reports, said. Britain's housing market has come under pressure in recent months. Mortgage lender Nationwide has reported three successive monthly falls in house prices for the first time since 2009, while rival Halifax says annual growth is the lowest since 2013.
The combination of slow growth and high inflation has put the Bank of England in a difficult spot. Its interest-rate setters split 5-3 this month on the need to raise borrowing costs to see off a rise in inflation. The BoE is waiting to see if exports can offset weaker consumer demand. The index of UK consumer confidence produced by YouGov fell back to just above levels last seen in June last year. Its conclusions were based on data collected between June 9, the day after the election, and June 21.
"Our preliminary assessment is that economic growth will fall sharply over the coming months and the country will only be saved from recession by strong international trade,"said Douglas McWilliams, deputy chairman at the Centre for Economics and Business Research which produces the index with YouGov.
A separate survey by the CBI showed British shops had a better June than economists had expected but retailers are their most downbeat about the month ahead since September last year.
Debenhams, a presence on most British high streets, warned profits for its year to August 2017 could be towards the lower end of analysts'forecasts if market volatility did not ease, sending its shares down 4.5 percent.
The retailer reported a 0.9 percent fall in group like-for-like sales in the 15 weeks to June 17, its fiscal third quarter.
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28/06/2017
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