Polling Day 2017 – General Election Blog

The lovely month of May

For many people May is the best month of the year. But is it the country of May? That is the question that was posed on April 18th on the steps of Downing Street.

2017 is certainly turning into a very eventful year with increasing echoes of a century earlier when great political shifts were underway.

For financial markets and consumers life goes on in resilient fashion despite the increasing threats to the way of life in western democracies.

While Brexit has impacted the UK consumer through higher prices and seen sentiment and the feelgood actor fall away in the past 6 months, spending confidence continues as consumers enjoy a period of retail therapy, financed in part through increased borrowing.

Our regular charts show how the consumer is adapting to the political upheaval of the past 12 months.

Confident consumers ?

In the aftermath of the Brexit vote confidence slumped but quickly picked up in early autumn, although the past 6 months has seen sentiment slipping back to around its long-term average. In May, the month when confidence is most likely to rise, the CCB rose by 2 points to -5 with 4 of the 5 underlying measures improving. Since Brexit confidence is down by 4 points.

UK Consumer Confidence 1997 -2017

Source: GfK / European Commission / JGFR

Consumers feeling good ?

Yes measures of consumer expectations of inflation, unemployment, personal finance and the economy in the next 12 months. Since a survey high of +62 in April 2015, just before the 2015 general election, the measure fell back to +15 last June before the Referendum and subsequently post the Brexit vote has shed 33 points to -18.

JGFR UK Feel-Good Index 2001 -17

Source: GfK / European Commission / JGFR

Financial wellbeing: raising living standards?

As a proxy for living standards the JGFR Financial Wellbeing Index (FWI) combines measures of household saving, spending confidence and personal finances. Currently the FWI stands at +65, down from +85 in June 2016, pre-Referendum, but well above the long-term average of +16.
Between March 2008 and February 2014 the FWI was negative indicating falling living standards with a double low of -103 in October 2008 and October 2012. It is only since shortly before the 2015 general election that the measure moved up to around the levels pre-recession, peaking at +91 in January 2016, 13 points lower than the survey-high of +104 in September 2002.

UK Financial Wellbeing Index 2001-17

Source: GfK / European Commission / JGFR

The Financial consumer 2017: enjoying a spending boom?

Each quarter over the past 15 years JGFR/GfK has surveyed the savings, investment, borrowing and debt repayment activity of UK consumers. On average 77% of consumers intend to undertake one or more of 18 activities.

In the Q2 UK Financial Activity Barometer, 80% of consumers intend to be financially engaged (some 42 million). More people intend to save/invest (73%), borrow (23%), with a third of adults intending repaying debt. Using a 2-quarter moving average to reflect the 6-month timescale people are asked to consider, the JGFR Financial Activity Indices show a big jump in borrowing intentions over the past year, especially consumer credit, although for many borrowers debt repayment remains a priority.

UK Financial Activity Barometer 2002-17

Source: GfK / JGFR

Housing frustrations set to intensify?

Strong house price growth during a period in office generally results in governments being returned. In the past 2 years UK house prices have risen around 9% (source: Halifax), although there are considerable regional differences. The JGFR Housing Market Confidence Index combining mortgage intentions with property purchase intentions reached a survey high 126.9 in March on the back of record levels of property purchase intentions.

While cash buyers make up a significant minority of intending property purchasers, the majority will be buying with a mortgage. Many potential mortgagors however will be thwarted by mortgage lending criteria and by a shortage of properties for sale and continue among Generation Rent, at the centre of the debate over inter-generational equality.

Housing market confidence 2002-17

Source: GfK / JGFR

Happy investors ?

Unexpected election results in 2016 together with improving global growth prospects ignited rangebound stock markets. As a result, millions of investors, many in control of their own pension investments, will have seen an improvement in their wealth and household finances. Strong stock
market performances in the past 2 quarters have boosted investor sentiment and activity, with the JGFR Equity Buying Intentions Index up 13 points to 143.3, the best score since March 2006.

Equity buying intentions and the FTSE 100 2002-17*

*FTSE 100 indexed on a 2-quarter moving average basis
Source: GfK / JGFR

Household finances: consumers’ self- assessment

Considerable attention in the general election campaigns has revolved around the ‘just about managing families’ and ‘helping the many not the few’. Austerity is often mentioned to describe recent government economic policy. Despite the claim of austerity household finances showed a
remarkable transformation in the 2014-16 period as more families saved and fewer were ‘just managing’ and struggling. Employment opportunities increased, and the cost of living fell. The Brexit vote last June had an impact on household finances, mainly as a result of rising prices and more
people falling into debt. Financial engagement over the years is closely related to the strength of household finances. Post-election, household debt may weigh more heavily on household finances and financial egagement as the economy looks set to slow.

Household finances and financial engagement 2002-17

Source: GfK / European Commission / JGFR

Election 2017: Winning the hearts and minds of consumers

Unlike in 2015 when all the economic dials on the consumer dashboard turned blue for the Conservatives, this year’s general election is fought against economic dials far less favourable, with only the Brexit divide boosting Tory support.

Analysing different consumer groups shows the changes in confidence over the past 2 years and since the Referendum. Across gender, age and household income bands confidence is lower than in April 2015, before the previous general election. The biggest change is among 50-64 year olds where confidence has slumped, down 18 points, and among higher earners where Brexit concerns have been most felt.

Confidence among the under 30s is little changed compared to April 2015, but has recovered well since last July in the wake of the Brexit vote (up from -1 to +17). This group, including many students, are among the strongest supporters of staying in the EU and of Labour ,and may well be a
significant factor in constituencies where more young people are registered to vote – and do vote.

The female vote will also be crucial. In April 2015 slightly more women (a net 1%) believed the economic situation was better than 12 months ago. This was the first time for many years more women felt the economic situation had improved, and may have helped decide their vote. Over the
past year the proportion of women who believe the economic situation has deteriorated has greatly increased; from a net 11% in June 2016 to a net 38% in May 2017. While Brexit may override other considerations, for the undecided voter promises of a shift from perceived austerity may sway their vote.

Shifts in consumer confidence by gender, age and household income bands, April 2015 – May 2017

Source: GfK / European Commission / JGFR

A nation divided by region

Last June the Brexit vote split the nation with London, Scotland and Northern Ireland voting to remain in the European Union, and all other regions of the UK voting to leave. Last February JGFR/GfK asked the public whether the decision to leave was the right decision. As in the Referendum response patterns were the same apart from the North West where both the ‘correct ‘ and ‘wrong’ vote had almost identical response rates.

The mood across the nation in the past 2 years has shifted considerably. In London, despite the Brexit vote, confidence continues to be far stronger (+4) than overall in the UK (-5). Londoner’s confidence has fallen 5 points since the Brexit vote, slightly above the UK average drop (4 points). In Scotland the mood has been downbeat since the Scottish Referendum, and was the only region in negative territory pre the 2015 General Election (-5). Currently confidence among Scots is -13, 5 points down on June 2016. Northern Ireland has not only the issue of the border brought on by the Brexit vote, but also agreeing on its own government, with confidence down 5 points to -9 since last June, and by 13 points since April 2015.

Compared to 2015 the biggest fall in confidence is in Yorkshire / Humberside, down 16 points to -9. Despite the strong support for Leave in the majority of English regions at the EU Referendum, optimism about the outcome of Brexit negotiations appears to be in short supply. Only in the East Midlands (3 points higher) and West Midlands (up 4 points) has confidence improved. In the North overall confidence is sharply down (11 points lower). Sentiment has fallen more than the UK average in Wales (down 7 points) and the South West (down 5 points).

Difficult decisions face millions of voters in English regions where globalisation has deprived many regions of past industries. While the Referendum provided a binary choice to bring change to many forgotten areas, the general election provides a chance for voters in the regions to change the direction of the deficit cutting agenda through voting for substantial capital spending and welfare support. Whether this will win the hearts and minds of Leave voters will determine the result of the 2017 general election.

Changes in UK regional confidence, April 2015 – May 2017

Source: GfK / European Commission / JGFR

Enquiries: John Gilbert (j.gilbert@jgfr.co.uk) +44 (0) 208 944 7510 +44 (0) 7740 027968