The Future of Money, a new study from OMD and News UK shows that people’s growing uncertainty over Brexit, particularly the spectre of No Deal, is starting to change spending patterns.
The difficulty for marketers is that no clear new patterns are yet emerging. It’s not just a case of a general tightening of budgets or focusing on necessities rather than treats or luxuries.
The study reports that concern over Brexit has escalated from 31%, in June 2018, to 50% in December. Concern over the economy has seen a similar jump, from 29% last June to 41% at the end of 2018.
People are getting on with everyday life in the short-term but increasingly worried about the long-term future for their families. Coupled with high levels of debt, poor financial knowledge and declining saving rates, the forecast is for increasing volatility in markets. Some brands and categories will benefit from the boost in short-termism, fuelled by low interest rates, increases in credit card debt and the desire to have treats to maintain a sense of well-being. Others will suffer from consumer caution as uncertainty about the long-term outlook for family finances prevails.
The housing and car markets have already witnessed the impact of caution about longer-term investments, with house prices forecast to stagnate and the new car market down 5.5% in 2018. However, the short-term desire to enjoy life in the moment has seen increased spending on travel and home entertainment. The research shows that, since Christmas 2018, nearly a quarter of people have put off booking a holiday and 9% have delayed moving home – however, the overall proportion of people planning to go away or move house is stable.
People have no problem in justifying spending on little treats and bigger luxuries to make them feel good, to contribute to the happiness of family or to facilitate socialising with friends. This is despite a drastic decline in savings rates compared to income since 2014. Most people say that they save, but it’s mostly “piggy bank” saving for a “rainy day” rather than long-term investment in the future. Just 28% of people surveyed said they were saving for retirement.
At the same time, austerity and low interest rates have contributed to a new peak in borrowing, with 82% having credit card debt. Though the nature of the debt changes – people start paying off credit card debt more when they have a mortgage, for example – almost everyone is in some form of debt throughout their lives. The problem is that many people are not well equipped to manage debt. A third of people in the study said they had “little or no financial knowledge”, rising to 50% among 25-34s.
This combination of Brexit anxiety, an unknown post-Brexit reality, high debt, low savings and high levels of financial illiteracy is a perfect recipe for instability and unpredictability.
The report concludes that brands will need to foster a greater sense of togetherness and trust, offering reassurance and rewards to counter anxiety and uncertainty. It suggests that an understanding of the context in which consumers move, and their changing concerns at different lifestages will help brands to be as “responsive and agile as possible during turbulent times”.