UK consumer confidence falls to 26-year low in July due to Brexit

Consumer confidence in the UK fell to its lowest level in 26 years in July, more than analysts' expectations, due to uncertainties surrounding Brexit as Britons became gloomy about the economy.

GfK’s consumer confidence index dropped 11 points to -12 in July, worse than the expected -8, following the UK's vote to leave to the European Union.

It was the sharpest month-on-month drop in consumer confidence since March 1990 when Margaret Thatcher was Prime Minister and there were interest rates of about 15%.

It was also a further 3-point drop from the -9 recorded in the market research firm’s ‘Brexit Special’ in early July.

Head of market dynamics at GfK, Joe Staton said: “We’ve seen a very significant drop in confidence, as is clear from the fall in each of our key measures, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months, -19 points”.

Although the rate of decline was slower than reported after the EU referendum, consumers were also less optimistic about the state of their personal financial situation with the index at -9 points.

Staton added: “However, the Index continues to remain at a relatively elevated level by historic standards. Its future trajectory depends on whether we enter a new period of damaging economic uncertainty or restore confidence by embracing a positive stance on negotiating a new deal for the UK.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “July’s GfK consumer confidence survey puts paid to speculation that sentiment would improve after its immediate post-referendum plunge … The balance referring to optimism in the economic outlook collapsed to -25 from -14 in June, while the one referring to households’ optimism about their own finances dropped to -1, from +8.

“The plunge in confidence indicates that consumers will spend more cautiously immediately, even though pressure on their real incomes likely won’t mount until 2017, when sterling’s depreciation will have its peak impact on inflation.”

Economists have said falling business and consumer confidence may prompt the Bank of England to cut interest rates in August to a record low of 0.25%.