Market Loop - UK consumer confidence hits record low

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27th June 2022

Bite-sized business news from the UK and beyond

Good morning Wimbledon begins today with a record prize pot of £40.4m on offer. The winners of the men’s and women’s singles tournament will pocket £2m each and first round losers will get £50,000. But one of the big stories off the court is that squash maker Robinson’s is to end its sponsorship of the event after 86 years. Wimbledon said the partnership ended, ahem, cordially.

Today's stories

UK consumer confidence hits record low
Corporate America reacts to Supreme Court ruling

ECONOMY
UK consumer confidence hits record low

What happened?
New data released on Friday showed that UK consumer confidence has fallen to its lowest since records began in 1974. It came on the same day that the Office for National Statistics reported retail sales fell 0.7% last month, after growing in April.

Brits are feeling gloomier than ever
That’s according to the closely watched GfK consumer confidence survey which gauges people’s perceptions of their personal finances and general economic conditions,

The measure fell by one point to -41 in June, a new low, proving that the Platinum Jubilee celebrations and sunny weather wasn’t enough to lift the British mood.

It suggests that Brits are feeling more pessimistic about the future than during the 2008 global financial crisis, after the Brexit referendum in 2016 or during the Covid lockdowns.

And it’s not hard to see why, household finances are facing unprecedented challenges. Inflation is running at a 40 year-high, the cost of borrowing is rising and energy bills look set to soar again this winter.

This pessimism is reflected in shopping decisions with consumers cutting back
In April retail sales rose by1.4% fuelled by spending on alcohol, confectionary and tobacco in supermarkets. But in May sales contracted driven by a 1.6% drop in spending in food stores, seemingly linked to rising food prices and the cost of living. But retail sales remain 3.0% above pre-Covid levels.

Zooming out: Consumer spending makes up around two-thirds of the UK economy. So a slowdown in retail sales increases the chance of a recession defined as two consecutive quarters of a shrinking economy.

Other stories to keep you in the loop

G7 summit: Leaders detail $600bn plan to rival China's Belt and Road initiative
UK to ban Russian gold imports
Barclays to buy Kensington Mortgages as interest rates rise
M&S blasts government decision to investigate plans for West End flagship store
Netflix is definitely getting ads, company announces
Cambridge-based tech firm Arm set to list in New York
Russia on brink of default as debt deadline looms
Japan urges 37m people to switch off lights

US
Corporate America reacts to Supreme Court ruling

What happened?
On Friday the US Supreme Court overturned Roe v. Wade, a 1973 ruling that provided a constitutional basis for abortion rights in the country for nearly 50 years. The decision had been anticipated since last month when a draft opinion was leaked. Under the court's ruling, individual states will have the legal authority to allow, regulate or ban abortion procedures, creating a patchwork of laws.

Over the weekend some of the biggest names in corporate America have come out with how they will respond to the historic and highly divisive ruling.

The scrapping of Roe v. Wade presents another challenge to business leaders who’ve been increasingly pressured to take sides on heated social and political matters. In addition to focusing on keeping their companies’ finances healthy, they must now navigate a maze of complex issues resulting from the Friday ruling—from workplace politics to health coverage to legal considerations.

Since the draft opinion emerged, several large corporations including Starbucks, Tesla and Airbnb said they would cover expenses for employees who needed to travel to get abortions. And following the official ruling, many others, such as Goldman Sachs, Disney, JPMorgan and Facebook owner Meta, made clear that they would do the same.

A few CEOs have spoken out about the ruling but most have refrained from making a direct statement. Companies operating in Republican-led states know that wading into the debate can spark unwanted backlash.

Big picture: The striking down of Roe could also influence corporate location decisions in this historically tight labour market. Companies, especially startups, trying to hire in a state where abortions have been banned could find it harder to recruit employees.

Stat of the day

Accounting giant PwC announced that half of its 20,000 UK staff would get a pay rise of at least 7%, while 70% would get a rise of 9% or more

Interesting links from around the web

How to read more books
The degrees with the lowest average salaries five years after graduation
‘Do I sound stressed to you?’ How a hard day at work changes the way you talk

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Market Loop - UK consumer confidence hits record low

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