Reopening of hospitality improves UK consumer confidence in Q3, but concerns remain for pandemic ‘second wave’

• Deloitte research sees UK consumer confidence climb one percentage point in Q3, to -16%;
• Restaurants see highest quarterly climb in leisure sector net spending, boosted by Eat Out to Help Out scheme;
• Education and job security confidence boosted by new academic year and return to work as sectors reopen; 
• Sentiment around state of the economy improves six percentage points from Q2 2020, but remains at near-record low;
• The Deloitte Consumer Tracker measures UK consumer confidence on a quarterly basis.

Consumer confidence edged upward by one percentage point, to -16%, in Q3 but remained seven percentage points lower than the same period last year, according to the latest Deloitte Consumer Tracker. Sentiment improved for job security, job opportunities and career progression, and children’s education as hospitality reopened during the summer and the academic year resumed. However, whilst sentiment on the state of the economy improved six percentage points quarter-on-quarter, the combination of new local lockdown measures, a year-end Brexit transition deadline, and ongoing financial impact of the COVID-19 pandemic saw year-on-year confidence fall by 27 percentage points, to -82%.

Deloitte’s analysis is based on responses from more than 3,000 UK consumers between 25th and 29th September 2020, at a time when some workers returned to home working, and new early closure rules for pubs and restaurants came into effect across the UK.

One for the road

According to the research, net spending increased quarter-on-quarter across a range of leisure categories, including eating out, drinking in pubs and bars, and visiting coffee and sandwich shops, up +47, +35, and +33 percentage points, respectively. Whilst net spending in most leisure categories remained below last year’s levels in Q3, consumers’ spending on hospitality was driven by an easing of COVID-19 restrictions from early July, combined with warmer weather and continued financial support from government schemes, such as Eat Out to Help Out.

Simon Oaten, partner for hospitality and leisure at Deloitte, said: “The gradual reopening of many leisure activities during the third quarter prompted a timid return to social life for consumers, following lockdown closures earlier in the year. Financial support for the sector has resulted in encouraging signs for dining and drinking out activities in particular. However, the next six months are likely to determine the speed of the leisure sector’s recovery, pending any sustained interruptions and ability to operate effectively.”

Back to school

Compared to Q2, this quarter saw a six percentage point increase in confidence around children’s education and welfare, driven by the new academic year and full reopening of schools. Likewise, job security sentiment improved by five percentage points quarter-on-quarter, as the reopening of hospitality enabled many to return to work. The findings also reveal a two percentage point improvement in confidence relating to job opportunity and career progression, largely driven by Generation Z and Younger Millennials following the return of part-time jobs in the retail and hospitality sectors.

With the original furlough scheme drawing to a close at the end of October, the impact of this on job security sentiment in the future remains to be seen. However, the majority of CFOs recently surveyed by Deloitte indicate that, on average, 82% of furloughed employees will remain on payrolls.

Whilst quarter-on-quarter confidence improved in these areas, the same cannot be said across all measures. Sentiment around levels of debt decreased by three percentage points compared to Q2, to -4%, as consumers anticipate the impact of the end of the original furlough scheme and mortgage payment holidays. Likewise, an anticipated contraction in third-quarter GDP and heavy deflation saw sentiment on the state of the UK economy hovering just above the record low, despite being up quarter-on-quarter.

Ian Stewart, chief economist at Deloitte, commented: “The path of the virus continues to dictate the direction of the economy as a whole, and that of consumer spending in particular. Despite the boost from pent-up demand, staycations and the Eat Out to Help Out scheme, there was less bounce in August’s GDP figure than expected. Now, with case rates rising, new restrictions being introduced and government support reducing, the outlook is for an even slower pace of growth in the coming months.”

A nation of shoppers

According to the Tracker, net discretionary spending increased 12 percentage points quarter-on-quarter, with the clothing and footwear categories driving non-leisure discretionary net spending. At the same time, net spending on groceries declined 11 percentage points from Q2 as patrons returned to dining out during the summer months.

Ben Perkins, head of consumer research at Deloitte, commented: “The gradual reopening of the physical high street and strong online trade has seen retail sales growth rebound to pre-pandemic levels. Consumers, already poised to spend, have been enticed back by end-of-season discounting. Following a challenging Q2, many consumer businesses will find improvements to net spending this quarter encouraging, but the lead up to Christmas will remain important. With consumers indicating a reduction in planned spending, maintaining momentum of online sales, and ensuring distribution channels can cope with demand will be key to a successful ‘Golden Quarter’.”

End

Notes to editors

About the research

The Deloitte Consumer Tracker is based on a consumer survey carried out by independent market research agency, YouGov, on Deloitte’s behalf. This survey was conducted online with a nationally representative sample of more than 3,000 consumers in the UK aged 18+ between 25th and 29th September 2020. Overall consumer confidence is calculated as an aggregate of six individual measures: job security, job opportunities, household disposable income, level of debt, children’s education and welfare, general health and wellbeing. Respondents have been asked their view on the state of the UK economy from Q3 2019.

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