The (final) Spring Budget earlier this month led to the usual slew of headlines (#omNICshambles etc.) but there is one particular take-away which caught our eye…
The Chancellor set out plans to put consumer protection under the spotlight, with the government pledging to produce a green paper to understand what more can be done to support and uphold consumer rights. This comes amidst widespread analysis that consumer spending is providing a counter-balance to businesses, which are demonstrating greater risk-aversion in the face of the economic uncertainty prompted by the EU-referendum vote.
Consumer confidence is clearly an incredibly important part of the economy, (according to gov.uk: household consumption accounted for 65% of GDP in 2016), but the Office for Budget Responsibility has cautioned that reliance on consumer spending is unsustainable – not least because inflation and consumer price rises are going to increasingly squeeze household incomes. To quote gov.uk again:
- Inflation has risen in recent months, with the 12-month increase in the Consumer Prices Index (CPI) reaching 1.8% in January 2017.
- This has been driven by global oil price rises, amplified by the post-referendum depreciation of sterling, which have led to increases in the contribution of the transport component of CPI inflation.
So it certainly seems like a tension is emerging: in the wake of the Brexit vote, popular tech products are seeing their prices creep up after recent falls in the value of the pound – and inflation on food doubled in a month. Meanwhile… consumer purchasing confidence is tapering off – ONS figures show that retail sales experienced a third consecutive drop in the 3-months to January as inflation bites.
Yet the economy is reliant on consumer spending to ride out the uncertainty, support growth and help keep prices under control.
We know from working with HR managers that maintaining staff morale in an ‘uncertain economic climate’ is a common challenge facing people management teams this year. Morale comes in many shapes and sizes, but for many it’s a case of keeping teams motivated in their work, and providing support that mitigates some of the external pressures, like price rises, thus helping to keep the economy going. Employee engagement is no longer exclusively about keeping people happy at work, it’s about benefits to their home life too.
It certainly seems to be the perfect storm, but we’d argue that this is actually a great opportunity for employers. Through salary sacrifice and benefit-in-kind schemes, businesses can play a key role in keeping employees motivated and satisfied in their roles.
For example, at a time where ‘luxury’ goods are likely to be the first to see a reduction in sales, benefit-in-kind (BiK) schemes, like our own Techscheme, keep the most popular consumer goods (from laptops, TVs through to fitness wearables) accessible and affordable for employees.
This obviously has the advantage of helping to maintain sales and support consumer confidence and choice, but also there is the added impact on employee morale and retention through the provision of a comprehensive and diverse benefits package.
Through keeping popular products accessible and affordable for employees, business can help to support consumer confidence and choice, giving a much needed boost to the economy – but more importantly for employees too.
* Some helpful analysis of this can be found here:
- BBC News: Budget 2017: The misplaced confidence of the British consumer
- FT: Budget 2017: Hammond vows to protect consumers from rip-offs
- City AM: Budget 2017: Consumer-led growth is unsustainable says former Bank of England deputy governor Sir Charlie Bean
- The Economist: The British economy soldiers on, but the chancellor acknowledges big risks ahead