It’s weird being in Britain at the moment. Possibly weirder than I’ve ever known – and that comes from someone who remembers the Summer of Love, three-day week, the UK’s IMF loan, the miner’s strike (70s and 80s), the big bang and even the previous EU referendum.
Yes, I’m old. Old enough to just scrape into the boomer generation. That’s the generation being blamed for voting Leave last week. Although it has to be said that I, and a lot of my contemporaries, voted Remain. And if only more younger voters had bothered to vote, maybe – no definitely – the result would have been different. You can’t blame Generation OAP for voting the wrong way if Generations X, Y and Z didn’t make the effort.
Anyway, that’s not the point of this piece. The fact is, the UK is weird at the moment. It’s like two countries and no, that’s not England and Wales vs Scotland and Northern Ireland. Nor is it Remain vs Leave.
It’s a weird World Turned Upside Down place vs Business As Usual place. The sun still shines, the rain still rains, the trains still get cancelled. But fundamentally it’s a new world.
New world, new behaviour?
And just as I find myself wondering how my neighbours voted, I also find myself wondering how last Thursday will affect people’s behaviour.
The answer to the second question, in the short term, at least, is that it’s making them more cautious.
MasterCard senior VP for market insights Sarah Quinlan said on a trip to New Zealand this week that there was a “dramatic” drop in UK consumer spending at the weekend after the Brexit vote result.
She told BusinessDesk that spending had fallen after the referendum date was announced but had begun to recover on the assumption that Remain would win… until Friday. She wouldn’t comment on whether the off-the-cliff fall in spending since then general or just related to credit cards.
Interestingly, Quinlan added that before the referendum, the US and the UK were the only global economies whose consumer markets looked strong. Which means that if UK spending stays soft, it’s all down to America to rescue the global economy.
Home of the brave
Not that it’s a great time for it to have to do that with its own potentially seismic vote due later this year meaning consumers have got to be pretty brave to go on any kind of spending spree.
But aside from the US presidential election, Quinlan fears that even if the US sustains its growth, spending habits there have changed beyond recognition since the financial crisis.
Some of those habit changes have been positive. People are travelling more (despite repeated retailer complaints that tourist numbers are dropping) and they’re eating out more (but not at expensive restaurants). They’re also spending more online with 7% of US sales now happening online (albeit lower than the 13% of UK sales and massive 20% of New Zealand sales). And overall that’s not cannibalising physical store sales as people are going out to shop more as a leisure activity.
But, here comes the bad news. People are buying fewer luxury goods and clothing spend has taken a hit as the greater acceptability of leisurewear means many they no longer have to buy specific smart clothes for work.
And with spending woes in other markets also taking their toll, the overall outlook post-Brexit vote is pretty weak. Quinlan said din her interview that luxury goods firms have been battling weaker economies and taste changes in markets like China, Russia and the Middle east with some product categories suffering disproportionately.
Sales of upscale watches are “just horrible”, Quinlan said, adding: “It’s no longer chic to be chic. We can’t find that consumer anymore. I question whether they are ever going to come back.”
Post-Brexit, that looks like even more of a dead cert.