Consumers continue to spend cautiously despite surge in confidence

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Consumers can be persuaded to spend as confidence in the UK nears a seven-year high but the recession has taught people to better manage household budgets.

Consumer confidence in the UK has surged by 14 per cent over the past year and, although still cautious, people are parting with their cash so long as the value of what they are buying is clear, according to data from Nielsen.

“People have got used to living on less and are far more selective in their choices as a result,” says Mike Watkins, head of retailer and business insight at Nielsen UK.

Savvy shoppers are saving money by going to value retailers such as Aldi and Lidl for essentials (with Aldi poised to overtake Waitrose as the UK’s sixth largest supermarket ), but shopping at the likes of Marks & Spencer for treats and special occasions.

“It’s not as simple as saying the market is polarised between up and downmarket – those who have money and those who don’t,” he adds. “That’s not the case. Consumers are still buying things that are important but they’ve found ways of coping.”

Discount groceries

Biggest concerns for people 2012 and 2014

More than half (53 per cent) of consumers opted for cheaper grocery brands to save on household expenses between April and June, according to Nielsen’s Global Survey of Consumer Confidence and Spending Intentions, and 34 per cent will continue to buy cheaper alternatives even when the economy picks up.

Overall, the picture is slightly more positive in terms of spending because even though more than half the population (58 per cent) have changed spending habits to save on household expenses, this is down from 70 per cent two years ago.

However, the broader economic pressure has not gone away, warns Watkins.

“Consumers are much more optimistic and more willing to spend but some are still unable or reluctant to do so as they don’t want to end up out of pocket,” he says. “As a result, consumers are shopping around more and using technology to compare prices and share ideas, all of which is really important as it helps them to manage budgets and make informed decisions.”

Switching to cheaper grocery brands was the most popular way to cut costs two years ago, but 18 per cent fewer people are doing that today, with 53 per cent doing so.

Saving on gas and electricity bills is now the most common way to cut back (61 per cent) and half the population will continue to do so as the economy improves.

Indeed, rising utility charges are the primary concern for 31 per cent of consumers living in Britain today, followed by debt, increasing food prices and job security (all 18 per cent).

This compares with two years ago when the economy was the biggest worry, and although it is the fifth greatest concern, fear is waning, falling by 12 percentage points to 17 per cent, in 2014.

While rising food prices are still a major cause of unease among consumers, this too has lessened by 4 percentage points in the past two years, the third largest fall over the period.

Price promotions

Percentage of people who think now is a good time to buy things 460

“The price of food is immediate for consumers, which is why there is a continual need for promotional activity such as price cuts and multi-buy savings, particularly from food retailers, to make sure consumers feel comfortable they’re getting value for money,” says Watkins.

Likewise, the number of people worried about the increasing price of fuel has halved and, although job security remains one of Britons’ primary concerns, it is down by 9 percentage points compared with two years ago. Plus the number of people who are feeling positive about job prospects in the coming year (35 per cent) has increased by 67 per cent since 2012.

As 2015 approaches, immigration (15 per cent), health (11 per cent) and establishing a work/life balance (11 per cent) are becoming more of a concern, with health worries growing the most, at 57 per cent over the past two years.

However, Watkins advises that this is because other problems have fallen back in line.

“We see these issues bubbling beneath the surface and they tend to come out more when economic concerns aren’t so top-of-mind,” he says.

While 60 per cent of people believe the UK is still in recession compared with 92 per cent in 2012, 20 per cent of those who do are confident it will be over next year. And 47 per cent of people now feel positive about their personal finances, the highest this measure has been in nearly seven years.

Credit crunch

How people spend spare cash

While 28 per cent of consumers say they still do not have any spare cash after covering essential living costs, among those who do 37 per cent say they are saving it and 21 per cent are putting it towards paying off debts, credit cards and loans.

Overall, the picture is slightly better for brands this time around as 40 per cent of people think now is a good or excellent time to buy the things they will want and need for the coming year – 33 per cent higher than those who said the same two years ago.

Holidays (28 per cent) and new clothes (22 per cent) are two of the most popular choices in the survey, although, paradoxically, 57 per cent are spending less on clothes and 34 per cent have reduced the number of holidays they take to create savings.

So, although more cautious than pre-recession, consumers are generally more optimistic than they have been for a long time and they are willing to spend money – but the value proposition has to be clear.

Consumer confidence nears pre-recession high

Top 10 most confident countries in Europe by consumer confidence score 460

Consumer confidence is the highest it has been in the UK since the autumn of 2007, according to Nielsen’s Global Survey of Consumer Confidence and Spending Intentions.

Positivity has increased fairly steeply over the past year leading to a Consumer Confidence Score of 90. This means Britons are now the fifth most confident population of the 32 European countries measured behind Denmark (106), Switzerland (99), Germany (96) and Norway (95).

Scores above 100 indicate optimism while scores below signify pessimism – the highest score the UK has seen was 101 back in 2006.

The UK is the 24th most confident nation in the world, with India topping the list after scoring 128. The global average now stands one point higher than the first quarter at 97.

“The most optimistic countries globally continue to be the likes of India, China and Indonesia,” says Mike Watkins, head of retailer and business insight at Nielsen UK.

“The UK has always been above the European average but Europe as a region has always been less optimistic than other parts of the globe.”

The recession and the Euro Zone crisis have all had an impact on consumer outlook and spend with Watkins suggesting that consumer confidence tends to be an indication of consumer demand six to nine months ahead.

“We don’t see food inflation rising significantly in the near future so it is probably going to be the election in nine months that has the next major impact on consumer spend. An increase to base rates and therefore mortgage rates [will also have an effect] but that is probably 18 months away.”

Keith Moor, chief marketing officer at Santander agrees that the upcoming election will likely influence people’s behaviour.

“People tend to hedge their bets spending-wise around the election as they want to see the outcome before they start committing to any other big purchases,” he says.

Marketers’ response

Keith Moor, Santander

Keith Moor, chief marketing officer, Santander

More people are switching their bank account now [that the process has been made simpler] and they look to get their money sorted, so it absolutely makes sense that 37 per cent of people are putting spare cash into savings, as consumers are more prudent than they used to be generally.

We’re seeing banks increasing lending particularly in the mortgage space, and interest rates are still at a very low level – although soon to rise according to the Bank of England – which is usually a sign that more money is in demand.

I’m always slightly wary of consumer confidence scores and people believing the data because when confidence has risen to extremely high levels in the past it has always preceded some kind of economic crisis down the line.

Andrew Cocker, Skyscanner

Andrew Cocker, chief marketing officer, Skyscanner

Despite prices on popular European flights coming down over the past 12 months, people are spending about 20 per cent more because they are being more adventurous in their choice of destination, picking places like China, Japan and Brazil rather than the usual favourites of Spain, Greece and                                          Turkey.

So even though they are spending more on flights it’s because they are going further afield now which suggests confidence in the economy as they are willing to spend more on holidays.

Our research shows that getting good value is still the number one priority for people though. This is also important because while people are spending more and going to more exotic locations the type of messaging they are responding to is still very much about value.


Nielsen’s quarterly Global Survey of Consumer Confidence and Spending Intentions measures the financial outlook and concerns of more than 30,000 online consumers in 60 countries. These results represent the views of UK respondents during the second quarter of 2014.

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