Festive Cheer in Short Supply for Retailers as Consumer Confidence Slumps

Retailers could be set for an underwhelming festive period if the latest polls on consumer confidence are to be believed.

According to GfK’s latest consumer confidence index, November saw optimism among potential shoppers fall to its lowest ebb since the immediate aftermath of the Brexit referendum, which caused very unusually high levels of uncertainty among consumers and businesses alike.

The fall to a reading of -12 on the keenly observed index is potentially a big blow to retailers who are always eager to deliver strong sales and profits around the turn of the year.

“Sadly there’s no festive cheer,” said Joe Staton, head of market dynamics at GfK, whose research is carried out on behalf of the European Commission.

“Household jitters following the recent interest rate hike, squeezed incomes, higher inflation and economic uncertainty have dampened the consumer mood across the UK.”

Retail sales have been strong in recent weeks but the latest data suggests that many people are holding back on major purchases which will worry businesses within the retail sector as Christmas approaches.

Mr Staton describes the drop in major purchases among consumers as a potential source of “acute concern” for retailers and suggests that Brits are “resolutely gloomy” about the prospects for the economy in the coming months.

The Confederation of British Industry (CBI) said recently that there are growing problems with demand within consumer facing service sectors of the UK economy.

The CBI said that while consumer service firms have been raising their prices rapidly in recent months, they are seeing their volume of sales fall and their profitability levels have been in decline for each of the past seven quarters.

Consumer service firms also became notably less optimistic about prospects for the UK economy during the three months to November.

“It’s no surprise that consumer services firms are having a tough time, as people feel the pinch in their pockets from higher inflation,” said Anna Leach, the CBI’s head of economic intelligence.

In October, the accountancy firm Moore Stephens published figures that suggested roughly one in every five restaurant businesses around the country have recently exhibited signs that they could be at risk of insolvency.