Deloitte reports reopening of hospitality improves UK consumer confidence

Deloitte’s Consumer Tracker research shows opening 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.

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.”

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.”

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