October 18, 2010 11:03 ET

Government Review to Hit Consumer Spending, Says New Research

LONDON, UNITED KINGDOM--(Marketwire - Oct. 18, 2010) - 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 - indicating widespread damage to the private sector.

The upcoming cuts have also damaged the coalition Government's popularity with support for the Lib Dems in particular slumping alarmingly.

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 highlight that it's not just the public sector that will suffer as the cuts impact adversely on spending.

Some 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."

The top line findings show:

*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 findings, RAPP's Gavin Hilton, Director, Consumer Experience, says:

"The research highlights what is obviously a high level of anxiety and clearly shows that fears of a slump in public confidence and consequent consumer spending look set to be realised. This has major implications for the private sector because consumers are clearly going to adapt their spending patterns and concentrate on areas that are really important to them. This means brands are going to have to get better at understanding their customers and prospective customers and adapt their strategies to reflect people's drivers and motivations." 

He adds: "More generally, rather than breeding a sense of camaraderie in adversity, the potential cuts seem only to have fostered a greater sense of self interest. The spending review has the potential to turn David Cameron's "Big Society" into a divided society." 

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