Roadmap out of lockdown fuels record jump in consumer confidence

• UK consumer confidence jumped six percentage points in Q1 2021, to -11%, the fastest rate of quarterly growth in the Deloitte Consumer Tracker’s ten-year history;
• State of the economy sentiment surged 12 percentage points from Q4 2020 as lockdown measures eased;
• Health and wellbeing confidence saw eight percentage point recovery, to -26%, as UK’s vaccination programme continues at pace; and
• Consumers back in the black as level of debt sentiment, at 1%, edges into positive territory.
  
• The Deloitte Consumer Tracker measures UK consumer confidence on a quarterly basis.

The first three months of 2021 saw a record quarterly rise in consumer confidence, rising six percentage points in the first quarter, to -11%, according to the latest Deloitte Consumer Tracker. Every measure of confidence saw both year-on-year and quarter-on-quarter growth, as consumers journey out of lockdown with a spring in their step.

Deloitte’s analysis is based on responses from more than 3,000 UK consumers between 19th and 22nd March 2021, as the UK’s phased lockdown easing remained on track.

After entering the year under the tightest of lockdown restrictions, the reopening of schools helped boost sentiment around children’s education and welfare to -11%, up six percentage points on the previous quarter. Coupled with the continued speed of the UK’s vaccination programme, sentiment around health and wellbeing improved eight percentage points, to -26%, the highest level since the start of the COVID-19 pandemic.

With restaurants and physical non-essential retail remaining closed in Q1 2021, consumers’ pockets improved this quarter. Household disposable income saw a seven percentage point boost to -10%; marking a 17 percentage point improvement compared to the same period last year. Further, consumers’ confidence in their level of debt has tipped over to the black, at 1%, for the first time in ten years.

Ian Stewart, chief economist at Deloitte, commented: “The UK is primed for a sharp snap back in consumer activity. High levels of saving, the successful vaccination rollout and the easing of the lockdown set the stage for a surge in spending over the coming months.”

Economic recovery

The start of the pandemic in Q1 2020 saw economic sentiment plunge to an historic low. However, armed with a clear map out of lockdown, extended furlough support through to the autumn, and the vaccination programme continuing, consumer sentiment on the state of the economy grew to -61%, a quarterly rise of 12 percentage points.

With CFOs also hiring at their highest levels for nearly six years, consumers are optimistic about both their job security, and opportunities and career progression; each up by six and seven percentage points, respectively.

Stewart continued: “The eventual peak in unemployment looks set to be far lower than had been feared, and far lower than following any downturn in the last 30 years. With employers anticipating a return to the office by Q3 2021 life should start returning to something which, though far from normal, is closer to it. The risk to this upbeat outlook is the emergence of new, vaccine resistant variants and a third wave of cases. With global case rates rising we’re not completely out of the woods.”

Consumers signal a Q2 spending spree

In an encouraging sign that consumers are preparing for further lockdown easing, discretionary spending grew this quarter, albeit by one percentage point. While net spending in most of the discretionary categories remain below where it was a year ago, there was strong quarterly growth in demand for holidays and categories related to socialising, such as going out and eating out.

With late June earmarked for the last of social distancing measures to lift, consumers expect to increase their spending across almost every essential and discretionary category. Net discretionary spending is anticipated to become positive for the first time, meaning the number of consumers expecting to spend more exceed those anticipating to spend less.

Reflecting consumer eagerness to spend, ‘going to a shop’ topped the list of leisure activities consumers are most likely to do after lockdown, with 63% saying they’d plan to return within a month of measures lifting.

Ben Perkins, head of consumer research at Deloitte, commented: “Although April 12th marked what many hope will be the permanent reopening of non-essential retail stores, mass remote working will continue to impact footfall on the High Street. Shopping behaviours have changed significantly during the pandemic, with some consumers discovering the convenience of online retail for the first time. It’s likely that many of these changes will continue beyond the end of the pandemic.Whether shopping online or in-store, though, if consumers remain confident about their income, then an increase in consumer spending could become the driving force for growth as the economy reopens.”

Consumers head out, but remain hesitant about large events

With the exception of spending on in-home entertainment - up one percentage point in Q1 2021 - overall leisure spending this quarter remains well below year-on-year comparables. However, with lockdown restrictions beginning to ease, consumers are gearing up for a long-awaited return to hospitality and holidays.

Whilst limited to takeaway options over this period, eating out saw the biggest quarterly rise in net spending, up ten percentage points, to -43%, followed by drinking in pubs and bars; up nine percentage points compared to the last quarter.

Simon Oaten, partner for hospitality and leisure at Deloitte, said: “Consumers embraced a brief cold snap this quarter, by heading to parks for picnics and takeaway coffees, for a chance to socialise with other households. With more restrictions lifting, albeit still limited to outdoor settings, warmer weather and pent-up demand could bode well for the leisure sector as it opens up further.”

Consumers are also looking to get away, with spend on holidays up seven percentage points this quarter, to -31%.

Oaten continued: “Whilst international travel for leisure remains restricted for now, consumers are still keen for some time off. Many will have accumulated vouchers from cancelled trips in 2020 and will be looking to rebook whilst they remain valid. For others, ‘staycationing’ offers another chance this summer to explore new areas around the UK.”

Whilst consumers seek to socialise again, they remain more hesitant, at least in the short term, on attending large events and festivals. Just 7% said they’d go to a live event within a month of being permitted to, with 25% preferring to wait six months or more.

Oaten concluded: “Leisure consumers remain cautious on large events, and the reopening of these might not immediately see pre-pandemic crowd sizes. The continued vaccination programme could be key to boosting consumer confidence to return to large events.

“Likewise, just 15% of consumers said they’d return to gyms within a month of reopening.

“The prospect of sharing gym equipment or working out in an indoor setting may be behind the caution consumers are displaying with regard to returning to gyms. Equally, after a year of exploring at-home fitness options, it could be we’re also seeing the start of more permanent shifts in consumer behaviours.”

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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 19th and 22nd March 2021. 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. Since Q3 2019, respondents have been asked their view on the state of the UK economy.

The Deloitte Consumer Tracker began in Q3 2011.

About Deloitte

In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.

The information contained in this press release is correct at the time of going to press.

For more information, please visit www.deloitte.co.uk.