Posted: 16 Feb. 2021 4 min. read

The latest Consumer Tracker analysis for Scotland

The Deloitte Consumer Tracker provides a quarterly analysis of consumer sentiment based on a survey carried out by YouGov on behalf of Deloitte.  The latest survey was conducted online with a nationally representative sample of 3,000 UK adults - 295 in Scotland - and took place over the first three days of 2021, after a Brexit deal had been reached and as a third national lockdown was announced.

The latest Consumer Tracker analysis shows that the final quarter of 2020 saw consumer confidence in Scotland fall by a further two percentage points to -18%, as the country headed into the New Year under fresh lockdown restrictions.

With the exception of personal finances, all other measures of confidence were below year-on-year comparisons, with ‘health and wellbeing’ and ‘children’s education and welfare’ categories reaching historic lows.

The emergence of a more virulent strain of COVID-19 saw confidence around health and wellbeing in Scotland fall 11 percentage points in Q4 2020, the lowest level ever recorded at -39%. Coupled with school and nursery closures in the New Year, confidence in children’s education and welfare also reached a record low, falling six percentage points to -20%.

However confidence in personal finances improved in the fourth quarter, possibly helped by the government and private sector income-support measures such as the furlough scheme and payment holidays for mortgages.  In Scotland overall sentiment on levels of household disposable income rose to -12%,  an improvement of five percentage points compared to the same time last year, prior to the COVID-19 outbreak, and an increase of seven percentage points on Q3.  This shows that Scottish consumers are slightly more positive than across the rest of the UK, where sentiment is at -17%. Confidence in levels of debt here in Scotland have also improved by 5 percentage points on Q3 to 1%.
 

Trends in spending

The latest research also shows that, in Scotland, discretionary spending decreased by two percentage points in Q4, to -25%. Whilst remaining low, this was boosted primarily by the purchase of alcohol and tobacco, electronic equipment and, clothing and footwear in the last 3 months of 2020.

With some consumers able to save more as a result of fewer spending opportunities, such as socialising and holidays, and disposable household incomes improved on Q3, this could be a positive sign for the recovery of the high street when non-essential retail reopens once more.

However, with greater consumer interest in buying locally, as a result of the pandemic, coupled with many more shopping online – some for the first time and experiencing the convenience and choice that can offer -  there  is a lot for retailers to consider around which behaviours will shift permanently after lockdown.
 

Bringing entertainment home

Tighter restrictions over the Christmas period in Scotland negatively impacted spending across almost every leisure category in the final quarter of 2020. With few options available, consumers turned to in-house leisure, such as on-demand TV and at-home exercise classes, which saw a ten percentage point jump on the previous year.

By contrast, restaurants, pubs and cafés were hit hard by social distancing and further restrictions at what should have been one of their busiest times of the year.  Year-on-year spend on eating and drinking out declined by -49 and -41 percentage points respectively, as many businesses in this sector had to close.   

In addition, while the first quarter of the year is usually an important booking period for the travel sector, as many of us make plans for the year ahead, Scottish consumers are currently less optimistic than their UK counterparts about the prospect of holidays, with confidence around both short and long holidays falling to -19% in Q4. This contrasts with UK consumers where there was a seven percentage point increase to -14% and -15% respectively, when compared to Q3.

The recent tightening of travel and quarantine requirements are likely to impact spending intentions on travel over the next three months and so it is likely that the ‘staycation’ could continue to be a popular holiday option with UK consumers again this year.
 

Looking ahead

There are signs that Scottish consumers are anticipating difficult times ahead, as they intend to spend less in both essential and discretionary categories in the first quarter of this year. Whether New Year health and diet resolutions will materialise however remains to be seen, as consumers’ spending intentions for groceries and alcohol and tobacco are still above those seen for the same period a year ago, with an increase of 7 percentage points and 10 percentage points respectively.

Looking further ahead, it’s clear that improving consumer confidence in Q1 2021, and beyond, will require both the ramping of the vaccination programme, which is going well so far, and the easing of lockdown restrictions.

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Gavin Hood

Gavin Hood

Partner

Gavin leads the Advisory Corporate Finance team in Edinburgh. He has a wide range of M&A experience across fundraising, acquisitions, disposals, management buy-outs, refinancings, strategy and exit reviews. Gavin has recently acted as lead advisor to: the shareholders of The Braid Group (a global bulk liquid logistics business) and Proflex Packing (a flexitank manufacturer) on their disposal to Hillebrand; MML and Lomond Capital on the combined merger with LDC’s Linley & Simpson (forming an ambitious national lettings and estate agency group); and Scottish National Investment Bank on its investment into M Squared Lasers (a Glasgow-based laser and quantum technology company).