British consumer confidence has fallen by the most in more than 45 years, adding to signs of a record-breaking hit to the country’s economy from the coronavirus crisis
British consumer confidence has fallen by the most in more than 45 years and new car sales have dropped faster than during the 2008-09 financial crisis, adding to signs of a record-breaking hit to the country’s economy from the coronavirus crisis.
Economists are warning of the biggest economic contraction in a century over coming months in Britain and in many other countries, and are uncertain about the strength of a rebound when curbs to slow the spread of COVID-19 are relaxed.
Data on Monday also showed UK construction activity suffered its sharpest slowdown since 2009 last month – despite the sector being spared a national lockdown – and private business activity overall continues to slow at a record pace.
GfK, which has conducted monthly surveys of British consumer sentiment since 1974, ran an extra poll between March 16 and March 27 which showed the weakest reading since February 2009.
The drop in the index to -34 from -9 in its earlier, regular survey for March was the biggest on record.
It may take time for consumers to start spending again after the lockdown ends, making the eventual recovery from the coronavirus recession more protracted, Andrew Wishart, UK economist at Capital Economics, said.
British department store chain Debenhams prepared to enter administration on Monday to protect itself from legal action from creditors during the coronavirus emergency.
The government advised people to avoid restaurants, bars and many other public places on March 16, and a week later ordered them to stay largely at home.
Surveys of businesses have nosedived in response. IHS Markit’s purchasing managers’ index for service firms and manufacturers, published on Friday, pointed to the sharpest contraction on record.
Adding construction, PMI numbers on Monday gave the same picture, and builders predicted a sharper downturn for April and beyond when more work will be affected by shutdowns, reduced demand and guidance on social distancing at work.
Samuel Tombs, an economist at Pantheon Macroeconomics, saw some hope for the sector.
If, as we expect, banks largely maintain the supply of credit to the economy and the government follows through on its plans for much higher levels of public sector investment, the construction sector should see a much swifter recovery than after the 2008/09 recession, Tombs said.
The biggest decline in the GfK consumer confidence survey came in households’ willingness to make major purchases, despite a spike in demand for freezers, televisions and home office equipment as people prepared for lockdowns at home.
This was echoed in car registrations data, which showed a 44% drop in sales in the usually busy month of March.
The drop would have been even bigger without pre-orders for cars for delivery in early March to benefit from a twice-yearly number plate change, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said.
The industry body now predicts car sales will fall by a quarter this year compared with 2019 to 1.73 million.