Brexit Gloom Weighs on UK Households And Their Financial Future
For the first time in three years more Britons are expecting their personal finances to get worse rather than better over the next 12 months amid the Brexit vote’s impact. NMG Consulting conducted a survey on behalf of the Bank of England (BOE) and found that the negative impact of the sterling’s drop on real time pay as one of the major explanations for British households having a pessimistic outlook on their overall finances.
The survey which was conducted online covered 6,018 households and contained questions on topics which included Briton’s views on general economy, their own financial situation, as well as their own future spending decisions.
The BoE says that the pessimistic outlook on household finances is due to the fact that in recent times the pound sterling has dropped along with real income growth. A lot of Brits believe that a hard Brexit will make things more sluggish and are concerned about their financial future.
Financial Times (Jul 8, 2016)
In a statement, the BoE said
For the first time in the past three years, the net balance of households expecting an improvement in their financial position turned negative. This has moved broadly in line with households’ assessment of their personal financial situation over the past 12 months, which suggests recent experiences have helped shape future expectations
BoE also states that the European Union still has some influence on how British households view their own finances as well as the economy in general. The annual UK consumer price inflation index had a 0.3 percent index in May 2016 before Brexit was confirmed. Since then, there has been a surge and the percent index it 3.1 percent in November.
With the inflation index rising and wage growth decreasing, the average amount of disposable income many Britons have is decreasing with each passing month. This has caused many households to slow down with their spending. This holiday season alone has been one of the slowest in recent history, with many citizens opting for smaller, more reasonable gifts rather than the high priced extravagant purchases.
Sales reports show that in store spending for Black Friday, the opening of the pre-Christmas shopping season, failed to improve over last year’s figures with a 3.5 percent drop in overall spending.
The BoE remains confident that things will improve in the coming months as the Monetary Policy Committee had a breakthrough with Brussels Article 50 last week which is expected to boost the confidence of domestic consumers.
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