Consumer Sentiment Survey - Autumn 2020

Consumer confidence at its highest point since the pandemic began heading into Christmas

Households optimistic about their finances but need a reason to spend 

Local lockdowns, increasing infections and the threat of a national lockdown. Social distancing, enforced safety measures and continued economic uncertainty. Significant restrictions impacting footfall and dissuading people from the high street. You might think the future looks bleak for UK retail. But, in a welcome surprise for retailers, UK consumers have money to spend. 

Remarkably, our latest consumer sentiment survey shows that confidence has rebounded to pre-pandemic levels. However, the problem for retailers might be persuading them to part with their hard-earned cash in the current environment.

Customer confidence back to pre-pandemic levels

Consumer sentiment has remained largely resilient throughout the pandemic, steadily improving following the nationwide lockdown in March. Even since our last survey in June, consumer sentiment has significantly increased. It has now rebounded to the levels we were seeing before the emergence of COVID-19 in the UK. In December 2019, for example, sentiment was at +3. 

Currently at -1, it is comparable to average sentiment levels seen between 2015-19, and is higher than at any point between 2008-14. Compared to other significant events, confidence is higher now than it was in September 2019, after a summer of political upheaval including the announcement of the new Prime Minister, and in the run up to the third Brexit deadline.

Confidence in September can often be a little higher than at other times of the year, driven by new jobs, children going back to school and students going back to university. But even with the limited effect of these phenomena this year, figures this September are better than they were in the first seven years of running this survey. People are genuinely confident in the strength of their personal finances.

Improvements across all age groups and regions

Perhaps more importantly, there has been significant improvement across all age groups and regions. 

Despite uncertainty around further education, jobs and prospects, 18-24 year olds are back to being most positive, increasing from a low of -23 in March to +29 today. Those over 65 have now moved from being the most pessimistic age group to reflecting the national average, with those 55-64 now the most negative. 

Local lockdowns and high incidences of COVID-19 have seemingly had little impact on consumer sentiment. In this latest survey, those in the North East, North West and East Midlands are the most optimistic, overtaking London, with all of them showing a net positive sentiment.

A positive outlook: people have more money...

While these results may appear significantly more positive than other consumer confidence surveys, our consumer sentiment indicator has proven to be a good predictor of future consumer spending patterns over the last 10 years. 

The positivity emanating from this year’s survey is down to most people simply having more money. Whether through government stimulus (such as the Coronavirus Job Retention Scheme) or saving money on going out and holidays, over 60% of people have either not been financially affected or have saved money since the start of the lockdown in March. By contrast, only 3% have lost all of their income, and only 11% have lost some of their income. Remarkably, only 16% of over 65s have experienced any financial pressure in the last six months, perhaps explaining the significant improvement in their sentiment. Although, by contrast, 53% of under 25 year olds have been affected, through either income loss or having to borrow money or cut back on their spending, yet this group remains the most positive.

Looking forward, most people think their financial situation will improve: only 8% expect to lose some or all of their income in the next 12 months. An overwhelming majority believe they either won’t be affected by unemployment or will find alternative work if they are. Very few think they will need to economise, postpone purchases, miss payments or dip into savings. 

...But shopping intentions have changed 

In any other year, stronger households finances would be good news for retail and leisure spending. 

However, since December 2019, when consumer confidence was last this high, net spending intentions have fallen across every category. People have changed how they plan to spend. 

At present, only grocery and home improvement see an increase in net spending intention (those that expect to spend more minus those that expect to spend less over the next 12 months). Generally, some categories have remained more resilient than others: the impact of lockdown has meant grocery, family, technology and home improvement remain a higher priority, with over 65s now more likely to spend on home and technology - perhaps to help keep in touch with family and friends - than before the pandemic. 

Elsewhere, around half of respondents say that they intend to spend less on going out and eating out. Unsurprisingly, a similar number indicated they would cut back on holidays, and this is the category where spending intention has fallen most since last December, reflecting the uncertainty of changing quarantine rules.

With an uncertain outlook retailers may need to adapt

Resilient consumer sentiment translated into a v-shaped recovery once the UK-wide lockdown ended. While this may not be sustained, leisure’s loss may be retail’s gain. However, retailers can’t afford to do what they’ve always done and expect results. 

Consumer sentiment hasn’t been this strong since December 2019, but people’s spending intentions have continued to decline, either because they can’t spend (on holidays, for example) or there are fewer events to buy for (due to fewer family gatherings and formal events). While this survey has shown that consumers have money to spend, it looks increasingly uncertain whether they will spend. 

This uncertainty hints that it could be a testing time for retailers going into this year’s Golden Quarter. But there is an opportunity for those retailers that can adapt to meet the needs and wants of customers. Some will find this easier than others. For example, homeware and fashion retailers can amend lines and prominence of products to meet an increase in demand - such as children’s clothing or loungewear. For leisure operators, for example, this change will be more difficult. 

“Despite the steep challenges facing the country, it's heartening to see that consumer sentiment remains resilient and has been improving steadily since the start of the nationwide lockdown in March. Whether this optimism in household finances translates into an increase in spending remains to be seen, but retailers will need to adapt what they do if they’re going to give consumers a reason to spend.”

Lisa HookerConsumer Markets leader, PwC UK

Notes

1. PwC’s latest consumer sentiment survey was conducted between 11-13 September 2020 and includes responses from a nationally representative sample of 2,098 adults.

2. PwC has asked the same question every few months since April 2008: “Thinking about your disposable income (money remaining after household bills, credit cards, etc.), in the next 12 months do you expect that your household will be better off or worse off?”. The index is calculated by subtracting the percentage of people who think they will be worse off from those who think they will be better off. Historically this index has provided an insight into the pulse of the nation, and has been a good indicator of future consumer spending patterns.

Contact us

Lisa Hooker

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)20 721 23910

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