General Election 2024: Economic Outlook and Consumer Prospects

General Election 2024: Economic Outlook and Consumer Prospects

Updated: July 15, 2024
6 minutes read

The 2024 General Election: change in Westminster provides a chance for a reset

Labour’s crushing General Election victory is a historic moment in British politics. After 14 years of Conservative-led rule, this is many adults’ first experience of a change of government. However, even the mammoth scale of Labour’s victory was widely expected before the polls even opened on 4 July. Data from Mintel’s British Lifestyles 2024 report suggests that half of Brits expected a change in government this year, and that feeling likely grew in the months to polling day based on media coverage of the opinion polls. 

Regardless of whether people saw the result coming, it represents an important milestone. While any election result is divisive, many Brits were simply looking forward to a change and this result offers an opportunity for a much-needed upturn in national sentiment. In February, only around a quarter expected the mood of the nation to improve in 2024.

Individuals aren’t the only ones hoping for a more optimistic outlook. Brands across the consumer-facing economy continue to face a tough task to convince people to part with their cash. The cost of living crisis has embedded a cautious spending mentality, and brands will be keen to capitalise on any reason for Brits to feel more upbeat and willing to loosen their budgets.

Image source: BBC News

Consumer sentiment: prices and interest rates continue to hold back spending…

Not so fast.

Labour has been at pains to highlight the difficult economic environment it is inheriting, and has signalled it will not open the spending taps as it assumes power. The impact on households is little prospect of a major improvement in financial situation in the short term. 

The good news is that around two thirds of people are getting by, and it’s important to note that both financial wellbeing and confidence have recovered well from the height of the cost of living crisis. However, this leaves a significant minority in a tricky spot, while even those in stronger positions are minded to retain a cautious approach to spending.

When CPI inflation fell back to the Bank of England’s 2% target in May, you could be forgiven for viewing it as the end of the cost of living crisis. But this would miss the point.

Moderate inflation now does nothing to undo the spiralling price rises of the previous three years. How people feel about their finances is more powerful than macro-economic indicators. In June, with CPI at 2%, half of Brits said the cost of living crisis still wasn’t getting any better, and just 3% that it was no longer a problem.

Cost of living still a lingering worry for some. Image source: Getty Images

Even as inflation has fallen, interest rate hikes have introduced a new threat to household finances. Mortgage rates have rocketed, and were still more than three times higher by May 2024 than they were at the start of 2022, and the Bank of England expects around a third of mortgage holders to see their payments go up by more than £100 a month by the end of 2026. This has had a knock-on effect on rents. In May, a third of renters were extremely concerned about their accommodation costs.

With day-to-day financial pressures still so pronounced, a change in government won’t be enough to prompt a confidence-induced surge in spending. Indeed, if any group is set for increased spending, it is Conservative voters, who are most likely to report healthy finances and be confident about their finances for the year ahead. More widely, consumers are prioritising savings to repair damaged finances

… but things can only get better?

It’s not all doom and gloom. Despite the lingering challenges, major issues that matter to household finances are trending in the right direction. Inflation is down and wage growth has outpaced prices for most of the last year. While there has been a rise in unemployment, the labour market remains relatively robust.

Interest rates remain elevated, but even here borrowers can look forward with optimism. A return to pre-2022 levels is fanciful, but the Bank of England is expected to start to bring down the base rate in the second half of this year, and continue to do so throughout the next two years.

Tangible improvements will take time to materialise, but Brits are over the worst of the challenges of the past few years. So, while the Election is unlikely to prompt higher spending on its own, brands that can harness a post-election feelgood factor long enough for household finances to catch up will be well set to succeed.

The summer of sport still offers opportunities for feelgood consumer spending

The biggest impact of the Election may then be the opportunity to change the narrative and speak to consumers in a more positive and optimistic way, while still recognising the challenges people face. 

For a more immediate sales win, brands should lean into the summer of sport. At the time of writing, England are preparing for their Euros quarter-final against Switzerland, while Scotland were eliminated in the group stage of the tournament. While neither side has been hugely impressive on the pitch (so far), their presence in Germany has brought crowds to pubs across the nation, boosting takings, while others have spent on new TVs, food and drink for home, and tournament merchandise.

Image source: Paris 2024

Even when home nations don’t succeed, major sporting events offer a unifying experience for people to get together and – crucially for brands – to put their hands in their pockets.

The Olympic/Paralympic Games later in the summer take this even further, bringing together the whole of the UK under one banner in a way that the Election and even the Euros can’t. Altogether, half of Brits are excited about the Olympics, and nearly three in 10 expect to spend money on watching sports across the summer.

Looking further ahead, the impact of the General Election on broader consumer spending will be dependent on a number of factors. Foremost will be getting the economy in a healthier, growing position, keeping a lid on inflation and enabling the Bank of England to bring down interest rates. The success of new policies in boosting household finances and encouraging spending will also be key.

Harnessing and maintaining any feel-good factor built up during the summer will supercharge the psychological impact and make people more open to spending on luxuries and big-ticket items, such as travel. Equally important, though, is timing and mitigating the effects of external events. The previous four General Elections were overshadowed by the financial crisis, Brexit, and COVID-19. The new government will hope for calmer waters to help move Brits into a more optimistic, less cautious mindset.

Rich Shepherd
Rich Shepherd

Category Director, Financial Services and Social Research.

 

Rich oversees Mintel’s Financial Services, Consumer Lifestyles and Media UK Reports teams and is also responsible for Mintel’s social and economic research in the UK.

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