The Deloitte Consumer Tracker Q2 2020

A tentative recovery ahead

The Deloitte consumer confidence index* remained at a record low in the second quarter of 2020, though it showed weak signs of a rebound as the lockdown started to ease from May after the COVID-19 pandemic reached its peak in the UK. The index recovered one percentage point from its historic low last quarter, to -17%, but consumers remained very pessimistic.

Weak signs of rebound in consumer confidence

In the second quarter of 2020, the COVID-19 pandemic continued to have a negative effect across most measures of consumer confidence – all scores bar personal finances remain 10 to 20 percentage points below the levels registered this time last year.

During lockdown, consumers showed record levels of concern about their health and wellbeing, and expressed growing apprehension about the job market and the delay in the reopening of schools. Meanwhile, sentiment around personal finances improved compared to last quarter, likely due to a combination of government-backed financial support, record low interest rates and a boost in savings during lockdown.

Outside of the six measures included in the confidence index, sentiment around the state of the UK economy reached a new record low at -88%, down a further 17 percentage points since Q1 2020 and a steep 60 percentage point decline from the Q4 2019 score, which reflected some optimism following the December general election.

UK GDP shrank -2.2% in the first quarter of 2020 – the sharpest quarterly contraction in over a century – and Deloitte expects a further -21.2% drop in the second quarter, with a total contraction of -12.2% in 2020. Andy Haldane, the Bank of England (BoE) chief economist, has declared that so far the evidence suggests a V-shaped recovery for the UK economy. However Barclays data shows that consumer spending contracted even faster than the wider economy during the first months of the COVID-19 outbreak. With unemployment widely expected to rise as the furlough scheme winds down, and consumer incomes under pressure, the tentative rebound in consumer demand from June is unlikely to return spending to pre-COVID-19 levels.

* Deloitte’s overall confidence index is the aggregate of six individual measures: levels of disposable income, levels of debt, job security, job opportunities and career progression, children’s education and welfare, and general health and wellbeing.

Consumer confidence remains low during lockdown

In the second quarter of 2020 UK consumers continued to feel most pessimistic about their health and wellbeing. Though sentiment around this measure improved by two percentage points quarter on quarter to -26%, it remained at historic lows as around 1,000 new COVID-19 cases were still reported daily in the UK during the time of our survey.

The announcement that schools would not reopen fully until September left many parents worried about their children’s education, while others worried about the safety of pupils being allowed back to school. In this context, confidence levels in children’s education and welfare fell by six percentage points in Q2 2020 to -19%. This marks a new all-time low, and it declines further to -49% among those with children in the household.

Growing concerns around the job market

With the unprecedented squeeze in activity during lockdown, a total of 9.3 million jobs were furloughed under the Job Retention scheme between April and June. This scheme and other forms of government support have helped to prevent sharp increases in unemployment, which stood at 3.9% in May 2020, unchanged since the beginning of the year. However, other data from the Office for National Statistics (ONS) shows a 16.7% year-on-year reduction in hours worked in March to May 2020 – the largest annual decrease ever registered – and vacancies falling to an all-time low in June. There is still uncertainty about the future of many jobs as the furlough scheme comes to an end and is replaced by the Jobs Retention Bonus, a new policy that incentivises employers to bring furloughed staff back. Consumer sentiment around job security remained at a historic low of -20% in Q2 2020, while confidence in career opportunities and progression deteriorated further to a new record low of -22%, down seven percentage points from Q1.

Household deleveraging and government support drive confidence in personal finances

The lockdown has encouraged households to reduce debt levels and has driven a surge in savings. In Q1 2020 UK households’ savings ratio hit its highest level since 2016 at 8.4%, while the Centre for Economics and Business Research estimates excess household savings of around £23 billion in the second quarter. Unsecured lending declined by a record -3% in May as consumers paid back their credit cards, and two emergency cuts in interest rates by the BoE brought interest rates down to 0.1%, the lowest ever in the Bank's 325-year history.

The government and the private sector have taken measures to mitigate the effect of the recession on household incomes. Over 1.8 million mortgage payment holidays have been taken up since March, and the initial three-month term was extended by another three months, with applications open until October. Universal Credit was also expanded to include those employed with low income or hours, and the claimant count hit 2.6 million in June 2020, an increase of 112.2% since March 2020. The government estimates that, as of the end of May 2020, its interventions since March have been worth around a fifth of working households’ income on average, reducing the scale of their losses by up to two-thirds.

At the end of Q2 consumers were more likely to be more confident in their personal finances than they were three months earlier, at the outset of lockdown, when uncertainty was greater. Sentiment around levels of debt improved by five percentage points in Q2 to -1%, which is one of the highest levels in Tracker history. Confidence in levels of household disposable income bounced back to pre-pandemic levels with a quarterly improvement of 11 percentage points to -16%. While this is a positive sign, consumers remain cautious, as 20% are concerned about not being able to make upcoming payments, and another 36% are delaying large purchases, according to the Deloitte Global State of the Consumer Tracker.

Additionally, there is a clear generational and socioeconomic divide in sentiment. Confidence around personal finances among Generation Z (aged 22 or younger) is 17 points lower than the national average, while sentiment is 14 percentage points higher among affluent consumers.

Consumption freezes during lockdown

The global pandemic has caused a big deflationary shock to the UK economy – inflation more than halved since February 2020, dropping to 0.6% in June. However, this has not translated into stronger purchasing power for consumers, as wage growth slowed faster than inflation over the second quarter, and fell into negative territory at -0.3% in May 2020.

This, along with forced closures during lockdown, has severely hampered consumer demand over the spring months. Analysis by the ONS found that more than a fifth of usual household spending was not possible during lockdown, while Barclays data shows that consumer spending fell 26.7% year on year in May, the second-largest contraction in more than 25 years following the record drop in April. Our research clearly reflects this and shows that net consumer spending shrank by 15 percentage points quarter on quarter. Discretionary spending collapsed by 23 percentage points to a new record low, while essential spending fell by 11 percentage points into negative net spending for the first time in Tracker history. Besides the impact of lockdown, stockpiling earlier in the outbreak could have also contributed to subdued consumer spending in Q2: 35% of respondents claim to have spent less compared to the previous three months as they already had everything they needed, or had stock and spares to use up.

With consumers forced to stay at home and leisure venues shut, net spending on grocery surged by 15 percentage points quarter on quarter to 40%, the Tracker’s highest ever. Meanwhile, alcohol and tobacco was the only discretionary category to see a positive net spending of 2%, up ten percentage points compared to the previous quarter. According to our survey, half of consumers say they have spent more in the second quarter compared to Q1 2020 due to price increases, suggesting that inflationary pressures could have also been at play. While the rate of inflation in the UK is falling rapidly, inflation for the food and alcohol and tobacco categories peaked in May 2020 at 1.8% and 2.6% respectively, and remained above pre-lockdown levels in June, despite a decrease month on month.

Increased net spending for grocery and alcohol and tobacco was not sufficient to offset drops in net spending across most other essential and discretionary categories. The most notable declines were registered in transport (down 67 percentage points compared to Q1) as well as in clothing, holidays, going out and restaurants (each down between 30 and 50 percentage points compared to Q1).


Looking ahead, consumers entered the third quarter of 2020 with a glimmer of optimism as the lockdown eases. Non-essential shops reopened in the UK on 15 June, and our research launched on 19 June, as the UK’s coronavirus alert level was downgraded from four to three. The reopening of pubs, restaurants, hairdressers and other leisure venues on 4 July was officially confirmed as our research closed on 23 June, but it had been previously announced as a placeholder date as part of the government plans for lifting lockdown.

Barclays data shows an uplift in consumer spending in June, when it contracted by 14.5% year-on-year – the smallest decline recorded since the start of the lockdown. With social gatherings gradually resuming and more activities reopening, consumers expect their net spending to surge in Q3 compared to the previous three months. However, demand is likely to focus on small-ticket items at first, as consumers remain cautious given the current economic uncertainty. According to the Deloitte Global State of the Consumer Tracker, 36% of UK consumers were still delaying large purchases at the end of June.

Net spending on essential categories is expected to increase by two percentage points in the third quarter, driven especially by a return to spending on transport. Indeed, our research found that 47% of consumers expect to return to public transport within two months, and 39% expect to resume taking taxis within the same timeframe. However, this increase will likely be offset by the fact that consumers anticipate reducing their spending on grocery and household bills compared to the previous quarter, as they plan to spend more time outdoors. Discretionary spending is projected to rise more steeply (by 33 percentage points), driven in particular by spending on restaurants and going out as well as a return to shopping for clothing and booking holidays, though probably just short-haul ones. Spending in the leisure and hospitality categories should also be boosted by government measures announced in July, including reducing the level of VAT on these categories from 20% to 5%, and a 50% discount on dining out at participating businesses through the Eat Out to Help Out scheme.

However, research from YouGov at the end of June found that 48% of consumers worry that the relaxation of lockdown measures goes too far, as they fear a second wave of COVID-19. We will have to monitor the direction the pandemic takes following the reopening on 4 July to assess whether consumer confidence truly starts to rebound in Q3. Even then, and despite up to £30 billion of further government support through the Plan for Jobs, it is unlikely that consumer spending will bounce back to pre-COVID-19 levels before the end of 2020, suggesting that the consumer recovery could be slower than the rebound in overall economic activity.

Key contacts

Simon Oaten

Partner, Hospitality & Leisure

Ben Perkins

Head of Consumer Research

Sara Ballaben

Research Manager

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