Markit household finances index suggest people have taken heart from response by politicians and the Bank of England

This article is more than 4 years old

This article is more than 4 years old

The British public’s confidence in the economy recovered in August as the country appeared to shrug off concerns that the Brexit vote would harm prospects for jobs and higher wages.

The rebound in sentiment followed a slump in July as consumers fretted about the impact that leaving the EU would have on disposable incomes.



Low earners and public sectors workers were the most pessimistic in the latest monthly survey, while the highest earners and private sector workers were the most confident about the outlook for their finances.

Confidence measures are watched closely by economists, who say a drop can cause people to stop spending, which hurts the economy and stifles investment.

Expectations for finances over the next 12 months picked up to 49.8 on the Markit household finances index in August, from 47.1 in July. Anything below 50 signals deterioration, so households believe the outlook is stable, but they are still feeling cautious.



Jack Kennedy, a senior economist at the financial data provider, said that July represented a wobble following the Brexit vote.

“Concerns seem to have eased in line with the removal of some of the immediate political uncertainty arising from the shock referendum result, combined with a strong monetary policy response from the Bank of England aimed to cushion the economy and head off any lurch towards recession,” he said.

A counterpoint to Markit was provided by a survey from the pollster TNS, which found household confidence had fallen sharply since the vote to leave the EU, with 33% of Britons believing the economy has worsened compared with a year ago, up 11 percentage points from April.

The snap poll of 1,199 people also showed that fewer expected to see a pay rise in the next 12 months and more thought the economy would fare worse over the next year.

“The latest data suggests that confidence in the economy is back down at levels last seen in 2011/12, when the country [last flirted with] recession,” said Luke Taylor, the head of social and political attitudes at TNS.

Retail sales data on Thursday will provide the first official steer on how consumer demand has been affected by the unexpected result of the 23 June referendum, after other measures have painted a mixed picture.

Major retailers including Tesco, Next and John Lewis say they have not been affected so far by the referendum result, and the British Retail Consortium said spending in shops bounced in July.

A CBI survey of wholesalers and retailers, however, found that sales volumes declined more rapidly in July than at any time since January 2012, with weaker consumer confidence a likely factor in the immediate period following the referendum.

The long-running GfK survey, Britain’s main gauge of consumer morale and considered a reliable indicator of future household spending over the years, suffered its sharpest drop since 1990 last month.