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Consumer confidence takes a massive hit

Consumer confidence takes a massive hit

Category: Money

Updated: 08/07/2016
First Published: 08/07/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

How confident are you feeling about the state of your finances? Unfortunately, it could have taken a knock recently, with the latest GfK Consumer Confidence Barometer finding that consumer sentiment has plummeted since the referendum result was announced.

The core index has fallen by eight points in the last two weeks and now stands at -9, marking the sharpest fall in 21 years (since December 1994) as consumers react to the prospect of splitting from the EU. Interestingly, sentiment has even turned negative among those who voted to leave, although they were still more optimistic than remainers (with scores of -5 and -13 respectively).

All of the key measures used to calculate the index have fallen, with a particularly sharp drop seen in terms of the UK's economic outlook. Indeed, sentiment towards the general economic situation over the next 12 months fell by a significant 15 points to stand at -29, with 60% of respondents expecting the economic situation to worsen in the next year, up from 46% who said the same in June.

Just 20% now expect it to improve – down from 27% – while 33% expect prices to rise rapidly in the next 12 months, up from 13% mere weeks ago. This has driven the major purchase index to fall by 12 points to stand at -3, another significant downturn. Unsurprisingly, sentiment towards consumers' personal financial situation has also dropped, down six percentage points to stand at +2.

Joe Staton, head of Market Dynamics at GfK, said that these were "extraordinary times", and that "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.

"Our analysis suggests that in the immediate aftermath of the referendum, sectors like travel, fashion and lifestyle, home, living, DIY and grocery are particularly vulnerable to consumers cutting back their discretionary spending."

Are you worried about what lies ahead? These are unprecedented times, and many are understandably concerned about the state of their finances. But there are things you can do to get a bit more certainty and take back control of your money – here are a few things to bear in mind:

  • Build up your cash reserves. One of the best ways to guard yourself against financial problems is to build up a suitable financial buffer. Make sure you've got a savings account that pays a decent rate – check out our savings best buys to get started – and consider a mixture of easy access and fixed rate accounts for short-term peace of mind as well as long-term returns.
  • Cut your bills. If prices are set to rise, you want to do everything you can to keep your bills down to size, be it cutting your shopping bills (by taking advantage of vouchers and discounts, for example) or getting rid of subscriptions you no longer need. Household bills can be looked at, too…
  • Renew, review, remortgage. Chances are you've got plenty of insurance policies and other financial contracts to your name, from broadband deals to gas and electricity and everything between. Well, if you think you're paying too much, now's the time to do something about it, and don't even think about renewing before you've compared the alternatives. And what about your mortgage repayments? Staying on your standard variable rate could mean you're paying far more than you need to, so check out our top remortgage deals and see how much you could save.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.