Confidence in UK economy drops from 45% in 2015 to 28% now: Barclays

The latest findings from Barclays’ “10 Years of Spend” survey reveal a notable decline in confidence regarding the strength of the UK economy. Over the past eight years, respondents’ confidence has plummeted from 45% in May 2015 to just 28% today. This decline can be traced back to several key factors: the aftermath of Brexit, the economic repercussions of the COVID-19 pandemic, a pervasive cost-of-living crisis, the rising influence of Generation Z, and various geopolitical concerns.

Interestingly, while general confidence in the UK economy has faltered, consumer sentiment surrounding non-essential spending remains resilient. The report indicates that between 2015 and now, an average of 53% of consumers have expressed confidence in their ability to engage in discretionary spending. This suggests that, despite the prevailing economic uncertainty, there is a willingness among consumers to spend on non-essential goods and services.

Moreover, the survey reveals that confidence in household finances has shown remarkable resilience, never dipping below 52% and averaging around 69% in the past year. This resilience indicates that while people may feel uncertain about the broader economy, many households are managing their finances thoughtfully. This paradox highlights a significant distinction: confidence in household finances appears to be much more steadfast compared to confidence in the overall UK economy.

Consumer behavior has shifted notably in recent years. Households are becoming increasingly budget-conscious, focusing more on value for money and price comparisons than ever before. The Barclays report emphasizes that discretionary spending growth has outpaced essential spending since 2021. This shift is largely driven by increasing expenditures in areas such as beauty, entertainment, and travel. Consumers appear willing to prioritize certain discretionary items while being more cautious about their overall spending habits.

Despite the financial pressures many households face today, discretionary spending has seen an impressive annual growth rate of 9.2% between 2021 and 2024, significantly outpacing the 5% growth witnessed in essential spending during the same period. This indicates a willingness among consumers to splurge on non-essentials, even as they navigate a challenging economic landscape.

The survey also reveals a notable statistic: 74% of British adults feel confident in their ability to live within their means, a figure that aligns closely with the 73% recorded in 2019 when tracking first began. This resilience could largely be attributed to heightened budget awareness, with 66% of respondents indicating that they are now paying more attention to their financial situation than they did a decade ago. However, it’s worth noting that only 45% of those surveyed feel better off than they did ten years ago, indicating a lingering sense of economic stagnation.

The divergence in confidence levels between household finances and the broader UK economy highlights the changing economic landscape and the evolving attitudes of consumers. As people navigate these complexities, it becomes apparent that economic confidence is influenced by both external conditions and individual household dynamics.

Given the current situation, businesses and policymakers must pay close attention to these shifting consumer sentiments. Understanding the nuances of discretionary spending, especially in categories like travel and entertainment, could present opportunities for businesses willing to adapt to consumers’ evolving needs and concerns.

In conclusion, while confidence in the UK economy may have received a significant blow, the resilience demonstrated in household finances and change in spending priorities paints a more optimistic picture. This perseverance can serve as a source of strength moving forward, allowing consumers to navigate challenges with a cautious yet hopeful outlook. As we continue to monitor these unfolding trends, it remains essential to recognize the importance of financial literacy in helping individuals and families make informed decisions in an increasingly unpredictable economic landscape.

The journey ahead may be fraught with challenges, but with increased budgeting awareness and adaptability, households in the UK are poised to forge ahead amid uncertainty. The resilience of the consumer will not only contribute to the recovery of the economy in the long run but may also lead to new patterns in spending that redefine how we approach discretionary purchases in the future.

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