Consumer spending dived in UK post-Brexit

After Thursday's Brexit vote, there had been a "dramatic" drop in credit card spending. Photo / iStock

The British public put away the plastic last weekend when a wave of caution ran through the country following the referendum result that has triggered the UK's departure from the European Union, according to a senior Mastercard global executive.

"Just the announcement (of the referendum) was enough to see spending pulled back," Sarah Quinlan, senior vice-president for market insights at Mastercard Advisors told BusinessDesk in an interview in Wellington.

But after Thursday's Brexit vote, there had been a "dramatic" drop in consumer spending over last weekend, said the US-based executive, who is in New Zealand to advise on global consumer trends. Spending had begun to pick up when the 'Remain' vote looked as if it might win.

"We had started to see travel picking up in the UK, had seen that kind of discretionary spending on jewellery and retail. To that now fall off is quite concerning," she said, because prior to the referendum, the US and the UK were the only global economies whose consumer markets were turning in strong performances.

Now, it was down to the US, where consumer spending is strengthening in response to a sustained pick-up in economic conditions, although it appeared that major changes in spending habits that occurred after the 2008 recession in the US might turn out to be permanent changes in habits, she said.

Among the major changes are that people are buying fewer high-end luxury goods, fine dining is declining steeply despite dining out continuing to grow, and there was a trend towards "experiential" spending such as holidays, live entertainment, and activities involving family and friends rather than consumer goods purchases.

The death of the work wardrobe was also causing people to buy fewer clothes as they wore the same clothes both at work and at home or while undertaking leisure activities.

Other traditional luxury goods markets such as the Middle East, China and Russia were also suffering because those markets respectively were experiencing lower oil prices, a clampdown on ostentatious wealth displays and corruption, and international sanctions.

Sales of high-end watches, for example, were "just horrible", Quinlan said. "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."

On the other hand, holiday travel was exploding, American airline schedules and hotels were full and there was comparatively little discounting occurring, and Mastercard was seeing a significant increase in purchases of premium rather than economy airline seating by US travellers.

While New Zealand was holding up, in part because of spending by the rising tide of Chinese tourists, even their spending was lower on average than it had been.

She urged New Zealand tourism operators to consider targeting US tourists more actively and packaging offers that allowed busy people with no knowledge of the country to travel here.

"One of the things we've been working on down here is to have (New Zealand tourism operators) reach out more to US consumers because US travel overseas is up 9.2 per cent and it's mainly been to Asia."

Quinlan also debunked the widely held belief that online shopping is killing traditional retailers. While New Zealand was remarkable for some 20 per cent of retail sales being online, high levels of online supermarket shopping were the driving factor in that outcome.

Elsewhere, online shopping is a much lower proportion of total sales, at 7 per cent in the US and 13 per cent in the UK. Consumers were increasingly regarding shopping as a social activity and successful chains were, in some cases, hiring more shop staff.