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As the uncertainty surrounding a Brexit from the European Union (EU) rumbles on, the Consumers team examine the potential implications of Brexit from the Households, Income and Expenditure and consumer angles. Insights include the uncertainty surrounding the real estate market in the UK, the impact of Brexit on the highest income-wealth segment and the generational divide that the June 2016 referendum highlighted. Discover more about the impact of the Brexit vote on the UK and global economies in Q3 2016, in our Global Economic Forecasts: Q3 2016 Strategy Briefing.
Aside from the ramifications on household purchasing power brought about by the expected recession in a disorderly Brexit scenario, households will be primarily impacted in the real estate segment. Housing prices are expected to slow their growth in the short to medium term, as property investors look to assess all the risks associated with an EU leaver. Housing completions are expected to drop annually by 12.7% in 2016 to 147,400. This is bad news for home goods and furniture retailers such as Steinhoff International, which is already seeing a decline in the UK market. Demand for property from EU buyers in particular is expected to deflate, although demand from markets such as China and Russia could actually rise, especially in London.
Source: Euromonitor Competitor Analytics
Note: Retail value in US$ year-on-year exchange rates
According to Euromonitor International’s Income and Wealth Distribution Model, a disorderly Brexit will impact all income and wealth segments but the top division is expected to be the most adversely affected:
A shrinking top segment with declining income and wealth will impact retailers and consumer-focused businesses that specifically target the UK’s wealthy and high earning individuals. Although this might not necessarily mean the need for companies to offer lower prices, it is important to emphasise the best value for money.
Source: Euromonitor International’s Income and Wealth Distribution Model
Note: Data for 2016-2020 are forecast
With Brexit implementation plans and timelines still in development, UK consumers are hedging their bets, googling how to gain citizenship elsewhere while also continuing to commute to their jobs, plan their holidays, pay their bills, and shop for necessities and nice-to-haves. We surveyed UK consumers in June 2016, just before the Brexit vote, and will re-survey them again in 2017 to assess how behaviours and attitudes have shifted in the medium-term wake of this historic vote:
Source: Euromonitor International’s Global Consumer Trends 2016 survey
The EU referendum that resulted in a Brexit vote has exposed the stark generational divide between “millennials” and “baby boomers”, as older people were generally seen to be more inclined to vote to leave than younger generations:
Source: Euromonitor International’s Future Demographics Model
Note: Data for 2016-2030 are forecast