UK consumer confidence fell by another percentage point to -17% in the last three months of 2020, according to a study by Deloitte.
Deloitte Consumer Tracker, which measures consumer confidence on a quarterly basis. shows the decline as Britain headed into 2021 under fresh lockdown restrictions.
The audit company’s research reveals that with the exception of personal finances, all other measures of confidence were below year-on-year comparisons. With health and wellbeing, and children’s education and welfare categories reaching historic lows.
Confidence around health and wellbeing in the fourth quarter of 2020 fell by 6% to -34% — the lowest level ever recorded — after the emergence of the deadly coronavirus variant.
Meanwhile, confidence in children’s education and welfare also reached a record low, falling four percentage points to -17%, due to questions over the reopening of schools after the Christmas holidays.
Prime minister Boris Johnson announced last week that schools will not reopen until at least 8 March.
Personal finance was the one bright spot, with the extension of some government and private sector income-support mechanisms being extended.
Chancellor Rishi Sunak, extended the furlough scheme and payment holidays on loans, mortgages and credit cards until through to April. This boosted confidence in personal finances, improving sentiment in Q4.
Ian Stewart, chief economist at Deloitte, said: “The easing of lockdown restrictions, coupled with vaccines being more widely rolled out and strong personal finances, should unleash pent-up demand to spend.”
While overall sentiment on levels of household disposable income “was flat in Q4 2020, at -17%, it remains a percentage point higher than the same time last year, prior to the COVID-19 outbreak,” Deloitte said.
More than a third (31%) of consumers said that their savings had increased in 2020 due to working from home, not paying for commutes, travelling or socialising.
Millennials lead the way, with 35% admitting they saved more last year.
In contrast, 29% of respondents said their savings had decreased over the same period, with 30% of Gen-X and 30% of Baby Boomers each falling into this category.
“High levels of savings combined with confidence in household disposable income point to favourable conditions for supporting growth in consumer activity when the recovery comes,” Stewart said.
The news of a Brexit deal between the UK and the European Union buoyed consumer confidence on the state of the UK economy in Q4. Sentiment jumped nine percentage points from the previous quarter.
But, the economic impact of ongoing COVID-19 restrictions has seen economic sentiment remain in the negative territory, at -73%.
Stewart added: “The deepest global downturn since the 1930s will leave a ‘hangover’ but, whilst other recessions have often resulted in the loss of skills and capacity, this time is different in many respects. Government initiatives, for instance, have significantly limited the damage to jobs and businesses.”
He said that the outlook for growth this year “hinges on the continued battle” between the coronavirus pandemic containment and Britain’s vaccination programme.
Discretionary spending increased by one percentage point in Q4, to -25%. While remaining low, this was boosted primarily by the purchase of alcohol and tobacco, electronic equipment, clothing and footwear, and major household equipment, according to the research.
Ben Perkins, head of consumer research at Deloitte, said: “As a result of the pandemic, many consumers shopped online for the first time and the experience has opened eyes to the convenience and choice digital technology can offer. Retailers should now be asking how they can retain these new customers.”
But, online shopping will never fully replace the “experience of visiting a store” and COVID-19 has exposed some truths that the “high street of the future will need to acknowledge and respond to longer-term behavioural change,” he added.
Deloitte’s analysis, based on responses from more than 3,000 UK consumers between 1 and 4 January 2021, was conducted after a Brexit deal had been agreed, and following the announcement of the third national lockdown.
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