When the EU Referendum took place in 2016, the long-term implications of Brexit didn’t really reflect on consumer spending and habits. Credit card debt showed no signs of stopping and household savings were at an all-time low, which made consumer cash the engine of UK economic growth.

According to new research, this is about to change. Multinational professional services network KPMG conducted a survey among British consumers and it’s clearer than ever that Brexit uncertainty has triggered a massive shift in spending and investment habits. Afraid of what could happen come December 31, 2020, 22% of Brits now avoid big purchases, while 8% started to set money aside every month just in case. This has been to the detriment of investments, which now seem less secure compared to cash savings, although interest rates remain low and inflation lowers the value of the GBP.

Young people and Londoners most likely to reduce spending

Although this change in personal finance management is emerging throughout the entire country, two groups stand out in particular.

Young people aged 18-34 are the most concerned about the long-term implications of Brexit on their financial security. Nearly half of those interviewed answered that they delayed large purchases such as overseas vacations and instead chose to add that money to their savings. In comparison, only 19% of the senior population changed their spending habits.

Londoners are also more affected by Brexit uncertainty compared to the rest of the country. The study revealed that 48% of Londoners preferred to set some money aside instead of spending it on a large purchase.

According to Credit Suisse, this change in sentiment occurred because back in 2016 people did not fully understand the repercussions that Brexit could have on their income. Now, they’re worried their incomes won’t keep up.

The trend had a noticeable impact on the retail sector. Last year, UK retailers had the worst September on record, as buyers held off on non-essential purchases such as clothes, electronics, furniture, and household goods.

Investments are also taking a hit

In uncertain economic times, people are less likely to invest their disposable income and instead they choose to keep it in savings accounts, where it doesn’t fluctuate and they don’t risk losing it. In total, 9% of Brits and 17% of Londoners said that they halted investments in stocks and shares. But while this reaction is understandable, it may send people into a false sense of security.

“Whilst people work to protect their finances from Brexit uncertainties, interest rates remain stubbornly low so savings aren’t really working for people.”, explains Paula Smith, head of banking at KPMG UK.

Instead, British investors should consider ways to mitigate Brexit risks by diversifying their portfolios and carefully monitoring the evolution of the GBP, as Brexit will undoubtedly have an impact on the Forex market too. British traders who have a trading account with an offshore FX broker should pay attention to GBP & EUR pairs and follow the news to understand how negotiations affect currency pairs.

Irish response shows a higher appetite for investments

Brexit has also had an impact on Irish consumer spending and saving habits. Recently published data from Bank of Ireland revealed that the New Year’s Resolutions for Irish people in 2020 were: increase savings (35%), cut down on spending (20%), pay off debt (14%), and learn more about investing in retirement (11%).

According to Bank of Ireland’s Savings and Investment Index, Irish saving habits have the lowest readings since August 2017, and one explanation would be that during the holidays people prioritise spending. This trend is particularly visible among the senior population, where the saving rate is just at 38%. However, the Irish are generally concerned about their long-term savings and plan to remedy this in 2020. When asked about how satisfied they were with their saving patterns, 56% of Irish people said that they were aware they weren’t saving enough. As for the Investment Index, it rose from the first time since March 2019 and the percentage of people who invest on a regular basis reached 35%.