Despite all the doom and gloom in the media about the economic impact of Brexit and a plunging pound increasing the prices of food and drink, the consumer remains surprisingly resilient and is actually spending more in pubs, bars and restaurants and remains confident about the immediate future for both themselves and the country. It is a very different story for business leaders and drinks chiefs.
A combination of the hottest September in 100 years, the Olympics and a determination to carry on despite any post Brexit fallout has seen consumer spending and confidence go up.
New figures from the hospitality, manufacturing and financial sectors show how there is a marked split between how consumers, the drinks industry, producers and on-trade operators see the future in a post-Brexit UK.
It appears the general public have been far quicker to come to terms with what the future might hold for the country, than general business and industry leaders who look at the falling pound and rising costs and fear for our future.
The stark difference is perhaps no surprise considering nearly half of consumers have the result in the EU referendum that they voted for.
The buoyant mood is certainly reflected in the latest spending analysis of consumer behaviour released by Barclaycard.
Restaurants and pubs boost
It has revealed there were double-digit increases in pub and restaurant spending in the third quarter of the year, which has helped drive overall consumer spend over the last three months.
It seems we were all quite happy to put the turbulent events of the summer behind us, with pub spend particularly strong, up 17.3% in September and 14.4% in the third quarter overall. Dining out was not too far behind with spending across the restaurant sector up 13.6% in the third quarter.
Barclaycard also puts this down to the hottest September in 100 years, the Olympics and the return of the football season.
It meant overall spending growth rose by 3.6% year-on-year. Further evidence that the consumer has become hardened against negative Brexit news was that in July spend growth sat at 2.6%, but then rose in August and September to 4.2% in both months.
Consumer confidence booming
Consumers are also generally confident about the overall UK economy. Barclaycard said it reported its highest figure since it started its research in 2014, with 48% of people optimistic about the coming months.
Seventy per cent of Brits are also confident about their household finances, the highest figure since the fourth quarter of 2015.
Paul Lockstone, Barclaycard’s managing director, said of its new figures: “For the first time since Barclaycard began tracking consumer confidence in 2014, more people now tell us they feel confident about the UK economy than those who don’t, and the proportion has jumped significantly since the EU referendum vote in June.”
But leading economists believe consumers are yet to be really hit in the pocket and much of the negative post Brexit news has gone over their heads. That does not mean bad times don’t lie ahead.
Ruth Gregory, UK economist, for Capital Economics said: “For the UK economy as a whole, we may be in a bit of a post-referendum sweet spot. Some of the positive developments that may cushion the impact of the vote, including the cut in interest rates which has shored up confidence, and the fall in the pound which has boosted export orders, have been felt before the adverse consequences, like rising inflation.”
She added: “Supportive factors, such as low interest rates and the likely easing in the fiscal squeeze in the Autumn Statement, should help prevent consumer spending from slowing too sharply.”
Drinks industry fears for the future
The mood is a lot different within general business and the drinks industry in particular. There news of a plunging pound, increased costs and the likelihood of rising inflation has sent confidence levels downwards
The Food and Drink Federation said its members were feeling “fragile” in the wake of the Brexit fallout. It has released a survey that shows more than two thirds (69.5%) of its members are less confident about overall business conditions. Only 11.2% are more confident.
In particular they are concerned about increases in production costs, ingredients and the inevitable fall in product and profit margins.
Ian Wright, the FDF’s director general, said:“Food and drink industry confidence is low. Slower revenue growth, coupled with prolonged business uncertainty, is affecting the industry’s ability to invest. The assurances we heard from government last week must be underpinned by credible plans for restoring confidence and negotiating a workable future relationship with the EU. Working with government through an industrial strategy partnership, we believe we can counterbalance uncertainty arising from the EU exit process and secure world-class status for the sector.”
Frugal Christmas in store
But interestingly consumers are already stealing themselves for increased food and drink prices with 47% expecting to have to spend more for their goods over the next three months. How that will play out remains to be seen.
It means 39% of consumers expect to have a more modest Christmas than last year, and will put even more focus on cashing in on discounts with 57% saying they would look to take part in major Black Friday and Cyber Monday discounts.