Our research with Retail Week has found that consumers are planning to reduce spending as they prepare for anticipated higher prices to bite. More than 40% of consumers expect the cost of living to worsen next year, compared with 24% who say it will improve, while 61% anticipate prices increasing as a result of Brexit.
This further squeeze on personal finances is set to result in cutbacks across all categories of spending except for food which was the only category where consumers say they will spend more.
Looking at the overall economic outlook, 48% of consumers feel less confident with only 14% feeling more optimistic. While men and women are similarly downbeat on the economic outlook, women are more likely to say they will spend less.
Hilary Ross, global head of retail, food & hospitality at DWF, said: "Businesses across the retail, food and hospitality sector will be hoping for the 'double deal dividend' described by the Chancellor in his Budget. The continued uncertainty over the outcome of Brexit negotiations is hurting consumer confidence and leading to an intention to reduce spend, or at least a belief that they will have to make cutbacks."
The findings come in a report to be published next month by DWF which surveyed 10,000 consumers across 10 markets, including 1,000 in the UK. As consumers prepare for increased prices, half (50%) of respondents said they could not consider Brexit a success if it results in higher prices, although 27% say they could. 49% of consumers take a negative view of the Government's handling of the Brexit negotiations, compared with 22% who feel positively.
Despite this, 36% of all respondents remain positive about the outlook for the UK post-Brexit, compared with 34% who are pessimistic – although there is a notable difference between respondents in London & the South East and those living elsewhere. 44% of respondents in London & the South East are positive about the post-Brexit outlook, compared with 28% who are negative. By contrast, those living elsewhere in the UK are less positve, with 36% taking a pessimistic view and 33% feeling positive.
Dominic Watkins, global head of DWF's food group, added: "It is no surprise that food retail is the only category where people think they will spend more next year – and, if anything, consumers are underplaying the likelihood, especially if we were to face a no-deal Brexit. The food industry will face a number of very significant challenges in the event of a no-deal, starting with substantial tariffs and price rises. Any additional practical barriers applied to the entry of fresh food will result in a delay in carrying out the additional required checks, and this will have a serious impact on both sides of the channel. Not only will it turn port areas into car parks, it will create a double whammy for consumers who’ll face both increased prices and, in all likelihood, a reduction in the range and shelf life of the products they enjoy.
"These huge logistical problems would result in a significant hit to agri-trade between the UK and our biggest trading partner, the EU - and specifically the Republic of Ireland. But the biggest problem businesses face is the lack of information. With no certainty as to what will happen after March 29 next year, businesses can't properly plan for what is to come and investments are being delayed."
Sign up to ensure you don't miss the full report
The DWF and Retail Week ‘Global Consumer 2019’ report is due to be released in conjunction with Retail Week in December 2018.