UK consumer confidence drops sharply to reignite recession fears

UK consumer confidence dropped at its sharpest rate in more than two decades, a survey from market researchers Gfk has found, as the Brexit referendum stokes worries about the economic outlook and inflation.

Gfk's headline consumer confidence index dropped eight points to -9, the fastest slide in British morale pace in 22 years.

Britons were found to be primarily concerned about the economic situation over the next 12 months, with this measure falling to -29 from -14, its lowest level since December 2012, implying 60% of respondents now expect the economic situation to worsen over the next twelve months.

Conducted 30 June to 5 July, the survey also recorded a 12-point decline in consumers’ intent to make major purchases over the next 12 months.

Consumer confidence fell most steeply among Notherners, with a drop of 19 points to -15, and among young people, down 13 points to +6.

Brexiteers, those who had voted to leave the EU, were found to be less concerned, with GfK's index at -5 for this sub-group, compared to sharply waning confidence among Remainers, whose sub-index dived to -13 points.

Reflecting on these results, economists at Barclays said they now expects households to materially slow their spending in this and coming years, forecasting a significant deceleration in private consumption growth to 2.0% in 2016 and to 0.1% in 2017, from 2.5% in 2015.

Berenberg differed in its view, arguing that consumer confidence is only loosely related to actual spending.

"We currently project stagnation rather than recession for the UK economy for the remainder of this year," the German bank said. "But if concerns about commercial real estate spread to the residential market, possibly with expectations of house price declines to come, the risk of a genuine recession could loom very large."