the imperfect storm the deloitte consumer tracker · 2020-05-10 · the deloitte consumer...

The imperfect stormThe Deloitte Consumer TrackerQ1 2020

The Deloitte Consumer Tracker Q1 2020

ContentsQ1 2020 at a glance 03

Consumer confidence 04Deloitte consumer confidence index * 05Individual measures of consumer confidence 06Consumer confidence about their levels of debt 07Consumer confidence about their children’s education and welfare 08Consumer confidence about job opportunities 09Consumer confidence about job security 10Consumer confidence about their household levels of disposable income 11Consumer confidence about their general health and wellbeing 12Consumer behaviours following the COVID-19 outbreak (1/2) 13Consumer behaviours following the COVID-19 outbreak (2/2) 14

The wider economy 15Inflation expected to drop below 1% following sharp drop in oil prices 16Unemployment to rise as COVID-19 lockdown slows GDP 17Consumer credit shows signs of slowdown 18

Consumer spending 19Consumer spending in the last three months – essential vs discretionary spending 20Consumer spending in the last three months by category 21Little evidence of price inflation on food items compared to previous month 22

Retail 23Retail sales (excl. fuel SA) 24Online sales 25Grocery shopping by channels 26Purchases of product and service categories by channels 27

Leisure 28UK consumer leisure spending in the last three months 29Leisure spending in the last three months by category 30Leisure spending in the next three months by category 31

Automotive 32UK car registrations (1/2) 33UK car registrations (2/2) 34Planned car purchases 35Affordability of car repayments 36

Outlook 37Outlook for consumer spending – essential vs discretionary spending 38Consumer spending in the next three months by category 39The last word 40The last, last word 41Contacts 42

02


Q1 2020 at a glance

*Net balances

Previous

Latest

-8.7%-18.3%

Overall consumer confidence (q/q)*

Previous

Latest

-16.5%-26.9%

Confidence inlevels of disposable income (q/q)*

Previous

Latest

-3.8%-6.2%

Confidence in levels of debt (q/q)*

Previous

Latest

-4.9%-20.1%

Confidence in job security (q/q)*

Previous

Latest

-5.5%-15.5%

Confidence in job opportunities (q/q)*

03

Consumer confidence

04


Net % of consumers who said their level of confidence has improved in the past three months

Deloitte consumer confidence index *

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020

Source: The Deloitte Consumer Tracker

Annual moving average

Consumer confidence falls to historic lowThe Deloitte consumer confidence index* hit a record low in the first quarter of 2020, as the impact of COVID-19 unfolded in the UK. The index fell nine percentage points compared to the previous three months, to -18 per cent – the lowest level since the Deloitte Consumer Tracker began in Q3 2011.

In addition to the decline in our core confidence index, we also saw consumers’ confidence in the state of the UK economy fall by 43 percentage points from -28 per cent in Q4 2019 to -71 per cent in Q1 2020, with the risk of recession looming.

*�The�Deloitte�consumer�confidence�index�is�an�average�of�the�net�%�of�consumers�who�said�their�level�of�confidence�improved�in�the�past�three�months�for�six�individual�measures�of�confidence�(see�next�slide).

-9pp q/qto -18%

05


Individual measures of consumer confidence

-6%

-28%

-27%

-20%

-15%

-13%

-4

-13

-11

-14

-10

-10

N/A-71%

-2

-10

-11

-15

-9

-10

-43

% point change year on year

Household disposable income

Levels of debt

Job security

Job opportunities/career progression

General health and wellbeing

Children’s education and welfare

Source: The Deloitte Consumer Tracker*Please note this measure is not included in the overall index

NEW MEASUREThe state of the UK economy*

Current Q1 2020net balances

Our overall confidence index is based on six individual measures of confidence

% point change quarter on quarter

06


Consumer confidence about their levels of debt

Net % of consumers who said that their confidence in their levels of debt has improved in the past three months

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



Some confidence in ability to cope with debt in the short termDuring the early stages of the COVID-19 crisis, consumers remained relatively more confident in their ability to cope with their debt in the short term.

Sentiment about levels of debt is the measure that registered the smallest quarterly decrease, down only two percentage points to -6 per cent. While some consumers might be able to dip into their savings to help in the short term, loan repayment and rental payment holidays, eviction bans and energy bill support might reassure others.

-2pp q/qto -6%

07


Consumer confidence about their children’s education and welfareNet % of consumers who said that their confidence in their children s education and welfare has improved in the past three months

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



Sentiment around children’s education hits record lowConfidence levels in children’s education and welfare also fell significantly in Q1 2020 to an all-time low of -13 per cent, declining further to -31 per cent among those with children in the household.

This follows the government’s announcement on 18 March of school closures until further notice and the cancellation of GCSE and A-level exams.

-10pp q/qto -13%

08


Consumer confidence about job opportunities

Net % of consumers who said that their confidence in their job opportunities and their career progression has improved in the past three months

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



Significant decline in confidence around job opportunitiesThe economic shock that the COVID-19 outbreak brought about in a matter of weeks led to an unprecedented rate of job losses. Further rises in unemployment also seem likely as second quarter GDP in the UK is expected to contract sharply.

As a result, sentiment around job opportunities and career progression was affected, registering a nine percentage point decline from Q4 2019 to -15 per cent.

-9pp q/qto -15%

09


-22%

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



Consumer confidence about job security

Net % of consumers who said that their confidence in their job security has improved in the past three months

Job security registers greatest decline this quarterConfidence in job security was also severely impacted. It saw the greatest decline this quarter, falling by 15 percentage points to -20 per cent, well below levels reached during the financial crisis.

-15pp q/qto -20%

10


Consumer confidence about their household levels of disposable income

Sentiment around personal finances takes a severe knockWhile it has yet to reach the lows reported in 2011 during the financial crisis, results for Q1 2020 reflect a clear shift from the glimmer of optimism consumers demonstrated in Q4 2019 at a time of consistently strong economic fundamentals.

The UK lockdown left many businesses struggling to stay afloat. Although government support was announced swiftly, uncertainty around eligibility criteria and payment timelines left many consumers anxious. As such, confidence in levels of household disposable income in Q1 2020 fell 11 percentage points from the previous quarter to -27 per cent.

Net % of consumers who said that their confidence in their levels of household disposable income has improved in the past three months

-50%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



-11pp q/qto -27%

11


Consumer confidence about their general health and wellbeing

Consumers most pessimistic about general health and wellbeingAmid the COVID-19 pandemic, in the first quarter of 2020 UK consumers felt the most pessimistic about their general health and wellbeing, with the measure plummeting to the lowest level of confidence ever recorded at -28 per cent.

Net % of consumers who said that their confidence in their general health and wellbeing has improved in the past three months

-30%

-25%

-20%

-15%

-10%

-5%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



-10pp q/qto -28%

12


77%

77%

74%

73%

58%

45%

35%

21%


I worry about my health/ the health of a loved one as I'm/they are at higher risk from coronavirus

I have been actively avoiding indoor crowded places for reasons related to coronavirus

I have been actively avoiding mass gatherings for reasons related to coronavirus

I have decided to not attend events/ social outings that I had planned to go to for reasons related to coronavirus

I have been in voluntary isolation/ have been practicing social distancing due to coronavirus

I have decided to cancel an upcoming leisure trip/ holiday for reasons related to coronavirus

I have lost / am likely to lose money following cancellations of trips/ holidays/ events/ social outings related to coronavirus

I have joined initiatives in my local community to help support the more vulnerable during the coronavirus emergency

Consumer behaviours following the COVID-19 outbreak (1/2)

Systemic shockThe unparalleled plunge in consumer confidence reflects the systemic shock that the COVID-19 pandemic is having on consumers’ lives. Close to four in five are worried about their health or that of a loved one, and at the time of the survey, 58 per cent were already heeding self-isolation and social distancing advice.

% of consumers who said that each of the below applies to them following the global outbreak of COVID-19

13


24%

12%

10%

3%

2%

43%

21%

18%

5%

4%


UK population UK workers

My employer implemented/ encouraged remote working due to coronavirus

I changed the way I travel to work to limit my risk of exposure to the virus

I asked my employer to work remotely due to coronavirus

My employer asked me to take paid leave for reasons related to coronavirus

My employer asked me to take unpaid leave for reasons relatedto coronavirus

Consumer behaviours following the COVID-19 outbreak (2/2)% of consumers who said that each of the below applies to them following the global outbreak of COVID-19

14

The wider economy15


-1

0

1

2

3

4

5

6

Mar

201

0Ju

l 201

0N

ov 2

010

Mar

201

1Ju

l 201

1N

ov 2

011

Mar

201

2Ju

l 201

2N

ov 2

012

Mar

201

3Ju

l 201

3N

ov 2

013

Mar

201

4Ju

l 201

4N

ov 2

014

Mar

201

5Ju

l 201

5N

ov 2

015

Mar

201

6Ju

l 201

6N

ov 2

016

Mar

201

7Ju

l 201

7N

ov 2

017

Mar

201

8Ju

l 201

8N

ov 2

018

Mar

201

9Ju

l 201

9N

ov 2

019

Mar

202

0

Source: Refinitiv Datastream

CPI inflation Average earnings including bonuses

Inflation expected to drop below 1% following sharp drop in oil prices

Depreciation of sterling to increase inflationary pressures in the longer termAlthough official data shows that wages continue to grow above the rate of inflation, the gap shrank further in February 2020, as growth in wages slowed faster than inflation, though only marginally.

Inflation was at 1.5 per cent in March, a slight decrease from the previous month. The Bank of England (BoE) expects it to decline below one per cent in the spring as a result of the sharp drop in oil prices, which will feed through into lower fuel prices. However, in the longer term the BoE expects the substantial depreciation of sterling to increase inflationary pressures.

CPI Inflation vs average earnings (inc. bonuses) (year-on-year % growth)

16


Unemployment to rise as COVID-19 lockdown slows GDP

Unprecedented rate of job lossesDespite the job market remaining strong throughout 2019 with unemployment at record lows, the economic shock that the COVID-19 outbreak brought about in a matter of weeks led to an unprecedented rate of job losses.

Google search volumes for unemployment benefits in the UK peaked at a level higher than during the financial crisis, and a survey by the British Chambers of Commerce found that 44 per cent of companies expected at least half their staff would be paid through the state-backed wage scheme. Further rises in unemployment are likely as second quarter GDP in the UK is expected to contract sharply.

0

1

2

3

4

5

6

7

8

9

10

Feb

2010

Jun

2010

Oct

201

0Fe

b 20

11Ju

n 20

11O

ct 2

011

Feb

2012

Jun

2012

Oct

201

2Fe

b 20

13Ju

n 20

13O

ct 2

013

Feb

2014

Jun

2014

Oct

201

4Fe

b 20

15Ju

n 20

15O

ct 2

015

Feb

2016

Jun

2016

Oct

201

6Fe

b 20

17Ju

n 20

17O

ct 2

017

Feb

2018

Jun

2018

Oct

201

8Fe

b 20

19Ju

n 20

19O

ct 2

019

Feb

2020


UK unemployment rate (all aged 16 and over)

17


Consumer credit shows signs of slowdown

Further declines are expectedUnsecured lending to individuals showed signs of a slowdown in February 2020 when it rose by only 5.7 per cent.

There are also likely to be further declines in the months ahead despite the BoE announcing an emergency cut in interest rates from 0.75 per cent to 0.25 per cent, which took borrowing costs down to historic lows.

However, cheap consumer credit is unlikely to be sufficient to sustain demand during the lockdown, at a time when opportunities to spend are severely limited, and worries about job security and household disposable income lead consumers to prioritise essential purchases.

-4

-2

0

2

4

6

8

10

12

Feb

2010

Jun

2010

Oct

201

0Fe

b 20

11Ju

n 20

11O

ct 2

011

Feb

2012

Jun

2012

Oct

201

2Fe

b 20

13Ju

n 20

13O

ct 2

013

Feb

2014

Jun

2014

Oct

201

4Fe

b 20

15Ju

n 20

15O

ct 2

015

Feb

2016

Jun

2016

Oct

201

6Fe

b 20

17Ju

n 20

17O

ct 2

017

Feb

2018

Jun

2018

Oct

201

8Fe

b 20

19Ju

n 20

19O

ct 2

019

Feb

2020


Unsecured lending to individuals (year-on-year % growth)

18

Consumer spending19


Consumer spending in the last three months – essential vs discretionary spending

Spending contracts during lockdownIn Q1 2020 discretionary spending collapsed by 13 percentage points and essential spending fell four percentage points.

Net spending in individual categories reflects the fact that opportunities to spend on going out, restaurants and clothing were severely restricted with lockdown closures, while spending on alcohol and tobacco is up year on year as consumption moved in-home.

Distribution of net spending among essential categories was also impacted, with consumers spending less on transport and more on health – the only category with a positive quarterly shift.

Net % of UK consumers spending more by category over the last three months

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020


Essential Discretionary

20


Consumer spending in the last three months by category


+7% -4 -5Essential

-5% -16 -16Transport

-1% -2 -2Education

+2% -2 -5Pensions and insurance

+4% -1 -6Phone, Internet and cable/TV subscriptions

+5% -2 -7Housing

+7% +3 0Health

+21% -8 -12Utility bills

+25% +5Grocery





-13% -13 -7Discretionary

-20% -18 -13Restaurants

-17% -20 -9Clothing and footwear

-13% -12 N/AHolidays & Hotels (short break)

-13% -11 -15Holidays & Hotels (long break)

-10% -6 -5Furniture and homeware

-8% -14 +4Alcoholic beverages and tobacco

-7% -9 -2Electrical equipment

-5% -2Major household appliances



-23% -21 -10Going out

-2 -6

21


Little evidence of price inflation on food items compared to previous month

Increased grocery spending blamed on changes in pricesAs panic buying surged amid the COVID-19 outbreak, net spending in the grocery category increased five percentage points this quarter compared to a year ago.

Half of consumers put increased grocery spending down to changes in prices, though the official data shows there is little change in price inflation on food items between February and March 2020, despite an actual increase year on year.

However, increased spending on grocery might also reflect increased in-home consumption, as well as stockpiling behaviour and the need to trade up due to restocking issues.

1.5

5

3.2

2.7

2.1

1.7

1.4

1.3

1.3

1.3

-1.2

1.7

4.5

3

2.7

2.4

2.5

1.8

0.7

1.2

1.8

1.4

0.1

0.2

1.9

3.7

2.5

3.1

0.6

2.8

1.2

5.2

0.8

3.3

2.7

0.6

-1.6

Total inflation

Communication

Health

Education

Miscellaneous goods & Services

Hotels, Cafes & Restaurants

Housing, Water & Fuels

Alcoholic beverages, Tobacco & Narcotics

Food & Non-alcoholic beverages

Transport

Recreation & Culture

Furniture, HH equipment & Repair

Clothing & Footwear


Mar 2020 Feb 2020 Mar 2019

CPI inflation by category (% change y/y)

22

Retail

23


Retail sales (excl. fuel SA)

Record decline in retail salesThe COVID-19 pandemic severely impacted sales, which declined year on year -3.9 per cent in value and -4.1 per cent in volume in March 2020. These are the steepest yearly declines on record for the last ten years.

However, there is a sharp split between food and non-food retailers. Food stores have seen value sales increase by 11.3 per cent year on year in March 2020, but are operationally challenged by the extremely high level of consumer demand. Meanwhile, non-food retailers are facing an indefinite period of store closures and slower sales, with a sharp year-on-year decline in value sales of -20.9 per cent.

-6

-4

-2

0

2

4

6

8

10

Mar

201

5

Jun

2015

Sep

2015

Dec

201

5

Mar

201

6

Jun

2016

Sep

2016

Dec

201

6

Mar

201

7

Jun

2017

Sep

2017

Dec

201

7

Mar

201

8

Jun

2018

Sep

2018

Dec

201

8

Mar

201

9

Jun

2019

Sep

2019

Dec

201

9

Mar

202

0


Annual moving average (Volume) Annual moving average (Value)Volume Value

% change in volume and value year-on-year

24


Online sales

0

5

10

15

20

25

Mar

200

7Se

p 20

07M

ar 2

008

Sep

2008

Mar

200

9Se

p 20

09M

ar 2

010

Sep

2010

Mar

201

1Se

p 20

11M

ar 2

012

Sep

2012

Mar

201

3Se

p 20

13M

ar 2

014

Sep

2014

Mar

201

5Se

p 20

15M

ar 2

016

Sep

2016

Mar

201

7Se

p 20

17M

ar 2

018

Sep

2018

Mar

201

9Se

p 20

19M

ar 2

020


UK Internet sales as a % of total retail sales Online sales peak in MarchOnline spending accounted for 22 per cent of all retail spending in March, up three percentage points month on month. This is the biggest monthly increase ever registered outside of the core online trading period of Black Friday, as amid the pandemic overall online sales increased 12.5 per cent year on year.

During the outbreak, online sales of food items increased 19.7 per cent year on year, but still only represented 5.7 per cent of total online sales. As more people relied on online channels to also access non-food items they are currently unable to purchase in-store, online sales of non-food items grew 16.8 per cent year on year.

25


Grocery shopping by channels

7%

5%

15%

21%

28%

64%

6%

5%

15%

19%

28%

61%

5%

5%

20%

20%

28%

58%

5%

6%

19%

19%

29%

60%

0% 10% 20% 30% 40% 50% 60% 70%

Convenience store

Specialist food/ drink store

Online websites

High street or town centre supermarket

Discount supermarket

Large supermarkets

Source: Deloitte Consumer Tracker

Q1 2020 Q1 2019 Q1 2018 Q1 2017

Channel usage for main grocery shop Large supermarkets see marginal growth amid COVID-19 stockpilingFollowing the outbreak, grocers have been operationally challenged to adjust supply chains to manage demand peaks and a faster-than-expected shift to online.

Amid all this, consumers’ grocery channel preferences remained fairly stable year on year. However, large supermarkets saw marginal growth, bucking the trend that has seen their position increasingly eroded by discounters. This is likely to reflect issues with low stock levels and stockpiling behaviours during the outbreak, as consumers turn to large supermarkets with greater shelf capacity and wider choice.

26


Purchases of product and service categories by channels

12

15

17

20

20

26

30

32

32

33

36

49

44

14

12

21

20

22

27

28

28

29

38

43

41

51

49

30

34

20

33

21

14

15

21

20

12

7

2

13

37

16

32

12

18

23

19

11

4

7

2

2

13

5

12

7

14

7

5

5

7

5

3

Beauty and personal care

Car, motorcycle and bicycle

Children & baby products, excluding clothes

Furniture and homeware

Clothing and footwear

Sports, fitness and outdoors equipment

Major household appliances

Electrical equipment

Toys, hobbies, collectibles and art

Entertainment excluding digital services

Events

Holiday & travel

Digital services

An online website on my laptop/desktop computer An online website/app on my mobile/tabletA store on the high street or in a town centre

Source: Deloitte Consumer Tracker

A store in a retail parkA store in a shopping centre

In-store

Online

Thinking about the LAST purchase you made from each of the following categories, where did you make your purchase from?

% consumers who last bought in the category

Non-food retailers enter survival modeAs footfall drops following the government-imposed lockdown, many non-food retailers will struggle to manage cash flow and look after their staff. Some retailers might strive to scale up their online operations quickly, to try to offset lost in-store sales, while others have chosen to halt their online sales altogether to protect staff.

Online sales across categories have increased by three percentage points from last quarter. The increase has been primarily driven by consumers settling into their new in-home routines and purchasing items such as sports equipment, furniture, household appliances and toys.

27

Leisure28


UK consumer leisure spending in the last three months

-7%

-8%

-8%

-11%

-13%

-15%

-16%

-20%

-21%

-3%

-5% -5%

-5%

-8% -7

% -6%

-6%

-6%

-3%

-9%

-6%

-4%

-8%

-3%

-4%

-11%

-13%

Gym

/ pl

ayin

g sp

ort

In-h

ome

leis

ure

activ

ity

Bett

ing

and

gam

ing

Atte

ndin

g liv

e sp

orts

eve

nts

Oth

er le

isur

e ac

tiviti

es

Long

hol

iday

s

Shor

t hol

iday

s

Cultu

re a

nd e

nter

tain

men

t

Eatin

g an

d dr

inki

ng o

ut


Q1 2020 Q4 2019 Q1 2019

Net % UK consumers spending more by category over the last three months

Leisure spending suppressed by COVID-19 restrictionsA slowdown in leisure spending is not unusual after the Christmas holidays. However, the COVID-19 lockdown has severely suppressed leisure spending, by removing virtually all opportunities to spend outside the home and forcing consumers to favour in-home leisure activities.

We normally see leisure net spending bounce back in Q2, but data on spending intentions this time suggests that consumers expect the lockdown to continue into the second quarter of 2020. As such, in-home leisure is the only category that performs better than in the past, though overall spending intentions are negative.

29


Leisure spending in the last three months by category




Long holidays


Short break

Attending live sports events

Going to the gym or playing sport

Betting and gaming

Other leisure activities

Eating out

In-home leisure activity

Drinking in pubs and bars

-7% -4 -4

-23% -21 -13

-22% -16 -9

Drinking in coffee houses and sandwich shops -19% -8 -4

Culture and entertainment -20% -14 -9

-16% -10 -12

-15% -8 -12

-13% -5 -5

-11% -6 -7

-8% -3 -2

-8% -3 +1

30


Leisure spending in the next three months by category




Long holidays


Short break

Attending live sports events

Going to the gym or playing sport

Betting and gaming

Other leisure activities

Eating out

In-home leisure activity

Drinking in coffee houses and sandwich shops

-8% +6 +4

-59% -40 -50

-53% -34 -41

Drinking in pubs and bars -49% -31 -39

Culture and entertainment -52% -42 -46

-41% -35 -42

-39% -36 -40

-35% -26 -28

-27% -25 -26

-26% -22 -22

-17% -8 -9

31

Automotive32


UK car registrations (1/2)

Car sales suffer their worst March in over 20 yearsQ1 2020 new car sales fell by almost a third year on year, culminating in the UK new car market falling by -44.4 per cent in March according to figures from the Society of Motor Manufacturers and Traders (SMMT).

March is traditionally the most important month of the year for new car sales, as it sees the first new number plate change of the year. However COVID-19 restrictions have seen dealerships close their doors and cars unable to be delivered.-55

-45

-35

-25

-15

-5

5

15

25

Mar

201

2Ju

l 201

2N

ov 2

012

Mar

201

3Ju

l 201

3N

ov 2

013

Mar

201

4Ju

l 201

4N

ov 2

014

Mar

201

5Ju

l 201

5N

ov 2

015

Mar

201

6Ju

l 201

6N

ov 2

016

Mar

201

7Ju

l 201

7N

ov 2

017

Mar

201

8Ju

l 201

8N

ov 2

018

Mar

201

9Ju

l 201

9N

ov 2

019

Mar

202

0

Source: The Society of Motor Manufacturers and Traders


UK car registrations % change year on year

33


UK car registrations (2/2)

The worst March in 20 years doesn’t disguise the growth of EVsReflecting on the sales that did occur in Q1 2020, it is clear that the market is on the cusp of a major change. In the first three months of the year, battery electric vehicles achieved a 3.8 per cent market share, up from 0.9 per cent during the same period last year.

In March alone the figure jumped to almost five per cent and is expected to keep growing as more models become available and businesses and their employees begin to take advantage of the generous tax benefits associated with purchasing low emission vehicles.

March 2020

March 2019 % change

Market share

March 2020

Market share

March 2019

Diesel 44,796 117,689 -61.9% 17.6% 25.7%

Petrol 153,025 305,163 -4990.0% 60.1% 66.6%

BEV 11,694 3,932 197.4% 4.6% 0.9%

PHEV 6,818 4,941 38.0% 2.7% 1.1%

HEV 15,265 16,429 -7.1% 6.0% 3.6%

MHEV diesel 10,229 2,999 241.1% 4.0% 0.7%

MHEV petrol 12,857 6,901 86.3% 5.0% 1.5%

Total 254,684 458,054 -44.40%

BEV – Battery Electric Vehicle; PHEV – Plug-in Hybrid Electric Vehicle; HEV – Hybrid Electric Vehicle; MHEV – Mild Hybrid Electric Vehicle

Source:�The Society�of�Motor�Manufacturers�and�Traders

UK car registrations – March 2020

34


Planned car purchases

Planned car purchases fall to their lowest levels as COVID-19 restrictions limit consumer optionsThe short-term prospects for new car sales are poor. Not only are dealerships likely to stay closed given the continuing lockdown, but planned purchases over the next three months are also at their lowest level in the history of the Tracker.

According to our research, only 2.5 per cent of consumers plan to buy a car in the next three months, down from five percent in Q4 2019.

0%

1%

2%

3%

4%

5%

6%

7%

8%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020



% of UK consumers planning to purchase a car in the next three months

35


Affordability of car repayments

COVID-19 could impact consumers’ ability to make repayments on their carsAfter housing, car repayments are often the single biggest monthly expenditure for a consumer. As a result, if COVID-19 continues to impact on their finances, some consumers may struggle to keep up with repayments.

During this period of economic uncertainty, the government and the FCA (Financial Conduct Authority) have introduced a range of temporary measures to assist consumers who are facing payment difficulties. Parts of the automotive industry were also quick to introduce flexible measures around payments to protect the interests of consumers.

57.4%

4.1%

4.1%

8.8%

56.6%

3.5%

3.8%

11.9%

54.8%

6.1%

4.7%

12.4%

0% 20% 40% 60%

Keep the status quo (pay the same)

Upgrade your vehicle (pay more)

Downgrade your vehicle (pay less)

End lease

Q1 2020 Q4 2019


Q3 2019

Thinking about your current financial situation, if you were offered the chance to change the terms of your finance/lease plan of your car(s) with no penalty which of the following would apply to you?

% of consumers who own a car on finance

36

Outlook37


Outlook for consumer spending – essential vs discretionary spending

Consumers increasingly fear a lengthy economic downturnOver the next three months, as government-mandated closures continue to limit their opportunity to spend, consumers expect to cut back further on their discretionary spending, especially in the going out, restaurants and holidays categories.

It remains unclear whether such spending will be deferred, or whether the outbreak will bear long-term consequences on people’s lives after the lockdown is lifted.

Net spending on essential categories is also expected to remain subdued into the next quarter, with a negative net balance (at -0.1 per cent) for the first time since Q1 2016.

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020


Essential Discretionary

Net % of UK consumers spending more by category over the next three months

38


Consumer spending in the next three months by category


0% -4 -7Essential

-38% -43 -46Transport

-5% -5 -5Education

-2% -6 -8Pensions and insurance

+2% +2 -1Phone, Internet and cable/TV subscriptions

+3% -4 -6Housing

+4% +2 +3Health

+17% +1 -3Utility bills

+17% +7Grocery





-35% -24 -30Discretionary

-59% -43 -56Restaurants

-38% -22 -30Clothing and footwear

-42% -40 N/AHolidays & Hotels (short break)

-40% -39 -46Holidays & Hotels (long break)

-23% -14 -16Furniture and homeware

-16% +7 -8Alcoholic beverages and tobacco

-18% -6 -10Electrical equipment

-19% -12Major household appliances



-58% -47 -50Going out

+19

-9

39


The last word

The unparalleled plunge in consumer confidence registered in Q1 2020 reflects the systemic shock that the COVID-19 pandemic is having on consumers’ lives, as many are heeding self-isolation and social distancing advice.

Takeaway 1The Deloitte consumer confidence index hit a record low in the first quarter of 2020.As the impact of COVID-19 unfolded in the UK, the index fell nine percentage points compared to the previous three months, to -18 per cent – the lowest level since the Deloitte Consumer Tracker began in Q3 2011.

Takeaway 2The COVID‑19 pandemic is having an impact across all six measures of consumer confidence.Confidence levels around health and wellbeing, household disposable income and job security fell ten percentage points or more compared to the previous quarter.

Confidence in job security saw the greatest decline this quarter, falling by 15 percentage points to -20 per cent, as the COVID-19 outbreak led to an unprecedented rate of job losses.

Takeaway 3Confidence in the state of the UK economy fell to -71 per cent in Q1 2020.With the risk of recession looming, sentiment on the state of the economy fell 43 percentage points quarter on quarter to -71 per cent.

Looking ahead, consumers enter the second quarter of 2020 expecting things to get worse before they get better, with rising unemployment and business default risks likely to damage confidence further and to exacerbate the ongoing squeeze in consumption.

Takeaway 4Net consumer spending contracted eight percentage points compared to Q4 2019.At a time when opportunities to spend are severely limited, and consumers are worried about their personal finances, spending in discretionary categories collapsed by 13 percentage points and essential spending fell by four percentage points.

Over the next three months, as government-mandated closures continue to limit their opportunity to spend, consumers expect to cut back further on their discretionary spending. Net spending on essential categories is also expected to remain subdued.

40


Ian StewartChief Economist, Deloitte UKThe shock to the economy that we have seen in a matter of weeks is causing jobs losses on a greater scale than in the financial crisis. The government is leaning against the downturn with unprecedented support for jobs, incomes and businesses. Despite this, worries about job security and the state of the economy have generated a sharp downturn in consumer confidence. Facing uncertainty about when the peak of the virus outbreak will be reached in the UK, consumers entered the second quarter of the year expecting things to get worse before they get better.

Mike WoodwardAutomobile lead partnerThere was some optimism that Q1 2020 would provide a bumper start to the year. However, the year started badly, with sales down -7.3 per cent in January and -2.9 per cent in February. This poor performance has been compounded by the impact of COVID-19 which has seen March experience a steeper fall than during last financial crisis.

The safety of workers, dealers and consumers remains paramount, and as such, it is unclear when the industry will return to ‘business as usual’. However, when we do emerge from the crisis, there is likely to be latent demand for new cars and everyone from manufacturers to dealers will be asking themselves how they can respond accordingly. A number of dealers have already moved their interactions online, and the ability to support this will become imperative in the longer term.

Simon OatenHospitality and Leisure lead partnerLeisure is one of the sectors most severely affected by the COVID-19 pandemic, as opportunities to spend on out-of-home activities are extensively suppressed. This poses an unprecedented financial challenge to the sector, with many businesses worried about their odds of surviving the downturn.

We usually see an uplift in leisure spending in the warmer spring months, which helps to sustain consumer confidence into the second quarter. However, with the UK economy showing signs of a looming downturn, consumers will probably remain cautious about their discretionary spending. The leisure consumer is in hibernation, however the current restrictions are highlighting the value leisure consumption brings to our economy and society. The leisure consumer remains a bellwether for the UK economy and their return must be closely watched and supported.

The last, last word

Ian GeddesRetail lead partnerDuring this unsettled period, the vital role that grocers are playing towards the national effort and keeping the nation fed cannot be underestimated. The contribution of retail’s key workers is testament to the industry’s resilience and adaptability; be it food retailers supporting the most vulnerable consumers to clothing brands switching production to dress hospital front lines. The retail industry has been unwavering in its response to the challenge COVID-19 has presented.

41


Contacts

Sara BallabenAuthor Manager,�Consumer�Products�and�Retail�Research

[email protected] +44 20 7007 6627

A note on the methodologySome of the figures in this research show the results in the form of a net balance. This means that in a survey of 100 respondents, assume that 30 reported they are spending more, 50 reported no change and 20 reported they are spending less. The net balance is calculated by subtracting the number that reported they spent less from the number that reported they spent more, i.e. 30 – 20 = 10. This means 10% of consumers reported that they spent more rather than less.

Ben PerkinsContributor Head�of�Consumer�Research

[email protected]+44 20 7007 2207

Dr Bryn WaltonAuthorManager,�Automotive�Research

[email protected] +44 20 7007 2352

42

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