PwC has been polling consumers about their attitudes to unsecured borrowing – including their ability to stay on top of repayments and their appetite to borrow more – since 2009. Drawing together key elements of the survey, it is possible to rate consumer credit confidence with a single measure, which this year stands at a higher level than at any time since the survey began.
That might seem counter-intuitive given the uncertainties so widely felt in the run-up to June’s referendum and thereafter, once Britons had voted for Brexit. With so many economists and commentators predicting a hit to the UK economy from Brexit – despite disagreement over the scale and duration of the potential damage – consumers had every reason to feel nervous.
In fact, there is evidence that the overall consumer confidence1 did take a dip in the immediate aftermath of the referendum – the Consumer Confidence Index compiled by a renowned market research group, for example, fell sharply in July. However, this index subsequently rebounded and, overall, PwC’s research suggests credit confidence remains high.
This reflects a macro-economic backdrop that has thus far been favourable enough to outweigh the negative effects of Brexit uncertainty. In an era of ultra-low interest rates that is now expected to last longer than previously expected, just 15% of consumers are worried about their ability to make debt repayments, the lowest level recorded since 2009; in 2010, for example, this figure stood at 30%.
Similarly, with employment levels in the UK still rising, and real wages back on an increasing trend, only 22% of consumers expect their wages to remain flat or to fall this year – down from 40% in 2010. Consumers also expect credit to remain widely available – only 13% now worry that they may not be able to get credit for their future purchases.
This is not to suggest that the Brexit vote has had no impact at all on consumer credit confidence – PwC’s research suggests certain groups have been adversely affected. In particular, younger consumers and, unsurprisingly those who voted for the UK to remain within the European Union are more likely to feel pessimistic about the impact that Brexit will have on their credit; by contrast, older age groups and those who voted to leave are more likely to feel optimistic.
Overall, almost two-thirds (63%) of remain voters are concerned about the repercussions of Brexit on their finances, while only 10% of leave voters feel the same way. And while the majority of people are comfortable that Brexit won’t have any impact on their ability to make repayments of existing loans, or to secure new borrowing if needed, a third of remain voters are worried.
In other words, the aggregate figures portraying Brexit as a relative non-event for consumer credit confidence obscure pockets of anxiety, particularly amongst younger remain voters. However, this has not been sufficient to prevent PwC’s overall consumer credit confidence2 measure from hitting its all-time high.
This finding is in stark contrast to the results of surveys of business confidence. The UK Composite Purchasing Managers Index (PMI), an indicator of business growth and confidence across the manufacturing and service sectors, reached a three-year low following Britain’s vote to leave the EU – and while September 2016 figures indicated a slight recovery, the index remained low relative to recent years amid increasing economic uncertainty and weaker demand.
Such data paints a picture of very different prevailing attitudes amongst businesses and consumers. While the former are deeply concerned about the potential impact of Brexit on their prospects, the latter remain sanguine: some may expect the referendum result to have adverse effects, but overall, consumer credit confidence levels reflect the still favourable economic backdrop.
Retail and commercial banking, PwC United Kingdom
Tel: +44 (0) 7595 610434
Banking and Capital Markets Leader, PwC United Kingdom
Tel: +44 (0)7711 773030