Consumer confidence rose in the final quarter of 2010 by two index points but a record number of people now say they have no expendable money.
The British Retail Consortium (BRC) and research company Nielsen’s Consumer Confidence Survey for Q4 showed 27 per cent of respondents ‘have no spare cash’, the highest level since the report began in 2005.
Overall confidence rose to 77 index points in the quarter but this is still lower than the 80 score at the start of the year, and 82 per cent of people falsely believe that Britain is in still in recession.
Stephen Robertson, Director General of the BRC, said: “I’d be surprised if this modest improvement in sentiment lasts.
“With Christmas coming, many people put their concerns to one side. Worries about jobs and money may briefly have seemed a bit less pressing. The impending VAT rise certainly made people less pessimistic about buying larger items.
“But the signs are that this boost hasn’t survived the extreme weather, VAT rise and revival of nervousness about spending cuts.”
Higher energy prices seem to be the biggest concern for households with utility bills on an upward ascent but consumers are also concerned with food prices and their continuing levels of debt.
Fashion retailers will be concerned that 65 per cent of consumers plan to cut back on clothes shopping due to tightening budgets, up from 58 per cent in Q3.
Britain remains below the global average for consumer confidence, which is currently 90 per cent, but 25 out of 52 countries polled, unlike the UK, saw confidence fall in Q4.
Chris Morley, Group Managing Director of Nielsen UK & Ireland, commented: “Looking forward into 2011, discretionary expenditure is expected to be squeezed harder with household income for most shoppers unlikely to keep pace with the rising cost of living.
“We anticipate a consumer who continues to feel the pinch, who has major concerns about meeting the cost of essentials and basic living expenses - such as food, household bills and fuel - and a consumer who will continue to employ strategies to make savings.”