UK consumer confidence has returned to pre-pandemic levels in Q2 2021, rising by two percentage points from the previous quarter, according to the latest Deloitte Consumer Tracker. Confidence is at its highest level since Q4 2019 and increased by a record nine percentage points year-on-year, albeit from a low base in Q2 2020.
Deloitte’s analysis is based on responses from more than 3,000 UK consumers between 18 and 21 June 2021, as the UK’s final lockdown phase was postponed.
Economy on course for recovery
Consumers were not only more confident about their own circumstances; they were also significantly more confident about the state of the UK economy. With the UK’s vaccination programme enabling the gradual easing of restrictions, sentiment around the state of the UK economy grew by 23 percentage points, compared to the previous quarter.
This confidence is also reflected by UK businesses, with CFO optimism, as measured in the recent Deloitte CFO Survey, near its highest level in 13 years. Crucially for consumers, 76% of CFOs anticipate increased hiring in the year ahead – the highest reading in almost seven years.
For consumers, confidence in job security has risen by four percentage points compared to the previous quarter, while confidence in job opportunities has seen a six percentage point increase. Despite overall confidence having increased across the majority of measures, respondents indicated that they were less confident about their level of personal debt and household disposable income, down three and two percentage points respectively, compared to the previous quarter.
Debapratim De, senior economist at Deloitte, commented: “The furlough scheme has been very effective in cushioning the economic blow to many individuals from the pandemic. The rapid recovery in consumer confidence and improvements in job security testify to its success. Vaccines and better weather are now enabling a more sustainable reopening of the economy. With an overwhelming majority of respondents reporting increased savings, the stage is set for a consumer-driven rebound in activity. We expect the six months between April and September to deliver greater growth than seen over the four years before the pandemic.”
Four-fifths have saved money during the pandemic
Discretionary spending increased by 19 percentage points in Q2 2021, with 79% of respondents disclosing that they have saved money over the course of the pandemic. Of these, 58% intend to spend more on holidays, eating and going out, and clothing, over the next three months.
However, not all consumers have seen disposable incomes increase and the pandemic has perpetuated savings inequality, with a fifth of consumers (21%) not saving at all since March 2020.
Ben Perkins, head of consumer research at Deloitte, commented: “Much of the hope of a sustained recovery in the consumer and retail sector rests on the near record levels of savings consumers have accumulated during the pandemic.
“While pent up demand has been a key driver of discretionary spending this quarter, the issue might be on the supply side – the pandemic has exposed structural flows and capacity issues. Leading consumer businesses are already rethinking their business models and adapting their supply chains, but many others are struggling to adapt.”
Leisure consumers gear up for a summer of socialising
Leisure spending increased across every category in Q2, with the exception of in-home leisure, as consumers chose to spend in categories related to socialising. These include eating out and drink in restaurants and pubs.
When consumers were asked about their future spending intentions in the next 12 months, half said they will be spending on holidays and hotels (49%) and a third on eating out in restaurants (31%) and going out (30%).
Simon Oaten, partner for hospitality and leisure at Deloitte, said: “The leisure and hospitality industry has had a torrid time, but there are encouraging signs that the stronger level of optimism amongst consumers could translate into increased leisure spending activity in the UK.
“The lifting of restrictions, improving weather and the continuation of the summer of sport, could see an acceleration of leisure sector spending during the next few months. The challenge for business leaders, however, will be how to juggle scarce staffing resource in order to meet this increased demand. Beyond this, the question remains as to whether the boost in confidence and spending will be enough to sustain the leisure sector when government support is removed later in the year.”