A third of consumers have no spare cash

The proportion of British shoppers who feel they have no spare cash has reached a new all-time high of 32 per cent.

The confidence of Britain's consumers rose last quarter but the increase may prove short lived with consumers' intentions to spend stuck at an all-time low, according to the latest Consumer Confidence Survey released today (Thursday) by global information and measurement company Nielsen and the British Retail Consortium (BRC).

Consumers' biggest concerns for the next six months continue to be things that affect their personal finances and household budgets. ‘Increasing utility bills' is the number one concern, followed closely by ‘the economy', and ‘increasing fuel prices'. In response to rising costs, 71 per cent of people say they have changed their shopping habits to try to save on household expenses, with 65 per cent of those switching to cheaper grocery brands.

Britain's second quarter (Q2) consumer confidence index went up five points from Q1 to 72 as more people felt a little better about their job prospects and personal finances, but it remains down on all of last year. Nineteen per cent of consumers are now optimistic about their job prospects for the coming year (up from 16 percent in Q1), but 73 per cent remain pessimistic. And, while 35 per cent of people are now optimistic about the state of their personal finances (up from 29 per cent in Q1), some 60 per cent of Brits remain gloomy about theirs.

Nielsen managing director for UK & Ireland, Chris Morley, comments: "Consumer confidence in Britain picked up in the last quarter. The extra bank holiday and warm spring provided a little light relief for shoppers and perhaps diverted thoughts away from the incessant squeeze on incomes, but sentiment is no higher than it was two years ago when the UK was in the grip of recession. We expect to see confidence boosted by a feel-good factor next year around the Olympic Games but until then - with price inflation running well ahead of any wage increases, renewed economic instability across Europe and a new round of utility bill hikes - it's hard to see any improvement in mood being sustained.

"Shoppers are once again cutting back on every day necessities. At the supermarket, for instance, our survey tells us that that people are re-adopting a strategy of switching to cheaper grocery brands to help stay within budget. This is now an acceptable compromise which many plan to continue when economic pressures ease."

British Retail Consortium Director General Stephen Robertson said: "The squeeze on disposable incomes is getting tighter. A third of people said they have no spare cash - a new record high. Weakness in the economy and rising utility, fuel and food bills top consumers' concerns for the next 6 months. Even after paying out for essentials, households that do have spare cash are choosing to pay off debts and build-up savings rather than spend on the high street.

"With finances under pressure, consumers are becoming increasingly savvy with 65 per cent saying they are switching to cheaper grocery brands - often own-brand labels - to stay within their budgets. Competition within the sector is helping to take the edge off price inflation with a larger number of promotions and discounts on offer.

"Against this backdrop the small increase in consumer confidence is encouraging, but retailers won't be expecting to benefit from it for some time yet. We're unlikely to see a sustained rebound in consumer confidence until genuine signs of a strong economic recovery gather momentum."

Globally, consumer confidence declined to its lowest level in six quarters to an index of 89 as economic recovery hit a stumbling block and recessionary jitters again reverberated around the world. In the latest Q2 round of the Consumer Confidence Survey, regions of the Middle East/Africa and Asia Pacific posted the steepest declines of 12 and nine points respectively compared with last quarter, but current figures are aligned with year-ago trends. Confidence levels in Europe (74) and Latin America (91) remained largely unchanged edging up one index point each. Despite its nine point dip, Asia Pacific remained the most optimistic region at 98 points, followed by Middle East/ Africa at 94 points.