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Government review to hit consumer spending, says new research

Government review to hit consumer spending, says new research

The private sector is set for a major backlash as the majority of the British public believe the Government’s imminent spending review will damage consumer confidence, result in an overall reduction in consumer spending and see their own spending fall.

The findings come from research carried out for marketing agency RAPP by the Trajectory Partnership, involving a representative sample of 2,032 UK adults and highlights how brands will now be faced with even greater challenges as consumers cut back and prioritise spending.

The top line findings show:

*62% of those polled believe the level of cuts – estimated at between £60bn and £85bn – will be too much with just over a third (34%) believing that level of reduction is “about right.”
*55% of the public believe the cuts will damage consumer confidence (16% disagree)
*67% believe the cuts will result in an overall reduction in consumer spending (20% disagree)
*64% say the cuts will see them reduce their own spending (13% disagree)
*58% think the cuts will mean they have less money to spend (16% disagree)

Respondents were also asked by how much they would cut spending in each Government department with international development being earmarked by the public for the biggest cut at 30.4%. Other areas that would suffer most include:

*Culture, media and sport – 26.6%
*Climate change and energy – 22.4%
*Child benefit – 20.7%
*Income support – 19.7%
*Housing benefit – 18%
*DEFRA – 18%
*Other welfare – 15.8%
*Tax credits – 13.7%

The budgets for schools, health and pensions would be cut least by the public at 2.7% for the first two and 2.5% for pensions.

The research also reveals that the Government’s “we’re all in this together” message is not resonating with the public, with self-interest apparent. Young people (16 to 20 year olds) who are less likely to need the NHS are willing to make much bigger cuts in health spending than older people.

Similarly, the young would double the cuts in pensions compared to older people. The English and Northern Irish would cut Westminster funding for Scotland by over £4bn whereas the Scots would subject themselves to only £1bn in cuts. The English would cut funding for Wales by £1.9bn while the Welsh would only cut spending by £0.6bn.

The imminent cuts have also had an impact on the Government’s popularity. Some 31% of respondents said they voted Conservative at the last election with only 25% saying they would vote the same way next time. The Lib Dem vote has gone down from 21% to 7% with Labour up from 20% to 22%.

Commenting on the overall findings, RAPP’s Gavin Hilton, Director, Consumer Experience, says: “We’re entering a new age of austerity where people will rethink – or rather re-feel - what’s absolutely necessary to them personally and what’s not. ‘Re-feel’ because we shouldn’t expect these decisions to be logical after a decade of free-wheeling consumer spending. New Austerity will pit the HD TV against the new Hoover, the premium FMCG brand against high street fashion like never before.

“People will refine and re-define their own priorities in order to protect their own sense of self, developing new coping strategies along the way. What’s clear to us is that it’s not about brands that shout the loudest but brands that deliver the highest practical and emotional utility to their customers that will form bonds strong enough to weather the storm. “It’s also clear that groups of people making exactly the same set of choices will become smaller and smaller – putting the onus like never before on the marketer to really sweat the detail and target budgets with laser precision to win traction, influence and advocacy.”

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