By Wiktor Szary

LONDON--Britons' concerns about the economy overtook worries about terrorism and immigration last year, according to a survey that showed that while overall sentiment remained strong, U.K. consumers grew increasingly anxious about Brexit's potentially disruptive impact.

Prime Minister Theresa May has said she would prioritize curbing immigration over access to the European Union's single market in the upcoming divorce negotiations, due to begin by the end of next month. The EU's market of 440 million consumers and accounts for nearly half of British goods and services exports, and economists warn that any disruption to free trade with the bloc could hurt the U.K. economy and prompt some companies to relocate to other European countries.

Nielsen's global consumer survey found that 28% of Britons cited the economy as one of their two main concerns at the end of 2016, a 12-point increase on the previous year.

"As the political and economic planning for Brexit gets under way, concerns about jobs leaving the U.K. have unsettled consumers," said Steve Smith, managing director for Nielsen U.K. and Ireland.

In a sign that British consumers are also beginning to register the U.K.'s accelerating inflation, which has been fueled by the pound's sharp depreciation in the wake of the Brexit referendum, Nielsen's data also showed an increase in concerns about rising fuel and food prices, by 5 and 2 points, respectively.

Sterling has lost some 15% against the dollar since the June 23 vote, driving annual consumer price growth to an over-two-year high of 1.8% in January.

Inflation is expected to overshoot the Bank of England's 2% target within months. Official data suggests that this is already squeezing Britons' wallets, with retail sales shrinking for the third consecutive month in January.

Driven by resilient consumer spending, the U.K. economy grew at the fastest pace among its peers from the Group of Seven advanced economies in 2016, defying gloomy predictions for an immediate Brexit-related slowdown.

Nielsen's data showed that overall, Britain's consumer confidence index stood at 102 in 2016, a one-point increase on the previous year and significantly above than the European average of 81. Britain was Europe's fourth-most-confident country, compared with second-most a year ago, Nielsen said.

Write to Wiktor Szary at Wiktor.Szary@wsj.com

(END) Dow Jones Newswires

February 20, 2017 19:15 ET (00:15 GMT)

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