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Research and analysis organisation, Growth for Knowledge (GfK), in the first week of April 2020, had declared its last figures for the Consumer Confidence in the United Kingdom for the mid and end March period based on a survey conducted just a few days prior to that. The data revealed that the Consumer Confidence Index had fallen sharply by 25 points between March's first two and last two weeks – falling to -34 from -9. This was followed by another survey conducted in the month of April, and a report was made available on 24th April 2020, for the month of April, which confirmed that, the consumer confidence Index in United Kingdom for April 2020 remained at -34 points.
It is interesting to note that index score recorded during Covid-19 Flash was the biggest fall since the records began to be published in the year 1974, as steps taken to curtail the transmission of coronavirus impacted on both the economic aspirations of households in the country as well as on the purchasing decisions being taken by the families, as per the report published by GfK.
The latest report has now showed that while one measure parameter increased, a second decreased equally and hence the overall index score is the same as the last time.
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What does the data reflect?
As per GfK’s Consumer Confidence Index report, interview for which was done between the 1st and 14th April 2020, the Personal Financial situation over the last 12 months has not changed since Covid-19 flash and has stayed at -4, while the Personal Financial situation for the next 12 months increased by 3 points from -17 to -14, which means that the outlook for the future might have gotten better in the minds of the consumers. Potentially due to the last few days’ poor performance, especially in terms of employment in the country, the General Economic Situation over the last 12 months was down by 4 points from -40 to -44 and the general economic situation over the next 12 months has stayed put at -56. This also means that while the consumers are confident that their own financial conditions can improve in the next 12 months, they are not very confident for the overall economic climate in the country and believe that it will be a while before the United Kingdom economy can bounce back. This is also clear from the fact that the Savings index, which does not contribute to the overall confidence index, increased by a single point from 4 in Covid-19 Flash report to 5 in April 2020.
Which products did well during the period?
As the lockdown period in the United Kingdom reached its peak in mid-April, other than the sales of essential goods, all the others, particularly all the casual retail activities such as fashion and appliance retail products and all the industries in the country were at a standstill. During this time, people started buying more entertainment products like Televisions and Home Entertainment Systems, DVDs, and Blu Ray systems. This was motivated largely by networks from Live TV and Sports Media showing nothing as all sporting events have been cancelled. According to another Growth for Knowledge survey, television sales in the United Kingdom grew in the week between 15 March 2020 and 21 March, and reportedly increased by 59.5 percent in terms of product volume compared to growth in the same week last year, when this volume rise was stated to be 43.3 percent.
Looking at what people are watching, it was also announced that the number of viewers who regularly stream DVDs or Blu-ray disks increased from 5 per cent in March 2nd week to around 11 percent a week later. Similarly, during the time, web browsing and 'downloading to own' (DTO) content jumped from 4 per cent to 9 per cent. Several other studies have indicated that surfing social media apps and websites has risen to unprecedented rates, and people spend more weekly time on their phones and laptops on an average relative to previous ones. While the sales of these items have gone through tremendous surge, the average overall retail price points this year are currently at their lowest yet. It means purchasing simple products for practical solutions from consumers, rather than straggling out on a superior models, which is intended to enhance user experience. Ultimately, people face having their whole families at home every day; potentially with the need to keep a distance from each other, and almost definitely with very different opinions on what they want to watch – so they purchase an extra TV set that they can conveniently keep in the room. This also means that while the volume of sales has increased, there has not been a significant shift in monetary terms, which could have turned this phase into an increase in revenue. Another interest GfK insight shows how more and more people are moving towards gaming, especially online gaming.
As the graphic below displays, gaming console unit sales were up by approximately 344 per cent year on year for the 12th Week in 2020 as compared to the 12th Week in 2019. Similarly, the internet game sales increased massively by almost 500 per cent, meaning 5 times more number of people are buying and playing internet games in 2020, as compared to 2019. Similarly, from week 8 of 2020 to Week 12 of 2020, data shows that the online gaming market share shot up by 7 per cent from around 30 per cent to 37.3 per cent, displaying a domination of the online gaming during this lockdown phase, and something for the authorities to ponder and focus up on in the coming days, as this is a community that has a huge global growth potential and could provide employment for a lot of people, especially as we have seen that more and more investors are now interested in the industry, and the prize pools for various gaming competitions are blowing off the ceilings.
(Data Source: GfK report on Impact on the UK Gaming market of COVID-19 measures -26th March 2020)
What does this mean for the economy in the times to come?
UK Consumer confidence is currently at a record low and as per the survey released by the GfK research group, it has never reached the rates before. It is expected to have a critical effect on the economy, especially in the times ahead, which will remain turbulent. It is mainly a key indication of the economy entering the recession period, because while companies are not expected to continue running at maximum capacity until this period is over, because customers will hesitate to spend a lot and would want to hang on to their savings, if any. Now though the bank rate is at its lowest point, people don't even expect to borrow, because without jobs in hands, repayment of their borrowings and mortgages would become incredibly difficult, which might lead to a drop in prices of all kinds of goods. If this period is over, the British Economy also has to face the daunting challenge of the Brexit transition process, in which it is the duty of the government to negotiate on different trade agreements, either with the European Union or with its other allied countries, and if they fail to do so, the recession could theoretically lead the country into an overhang.
The UK government has an extremely challenging task ahead of it, particularly with such low consumer trust. When this pandemic is controlled, the authorities' primary objective will be to protect the economy and raise trust in both customers and investors, so that investment continues, and the flow of capital continues to enter the economy.
