Relaxed purse strings herald a bounceback

There are early signs that consumer confidence is on the rise, with people less inclined to slash their spending on non-essentials such as holidays, entertainment and eating out.


The new coalition Government is set to introduce an emergency budget on June 22 with details on spending cuts to reduce the deficit. While this could affect people’s income, there is a sense of optimism in the air, according to a study by research consultancy BDRC Continental.

The mindset of needing to cut back on non-essentials is fading, according to the findings. BDRC polled more than 2,000 UK consumers at six intervals from March last year to January this year to determine which areas of “discretionary” spending would be cut from consumers’ budgets. People were polled on a range of sectors and asked if they would cut back, make no change, or spend more.

The picture is becoming increasingly bright with every new set of research figures, which reveal signs of recovery across most sectors. BDRC Continental director Tony Wornell predicts the ongoing trend for growth will carry on for the rest of this year. He says people are feeling more secure, with the study showing the amount of people experiencing a reduction in their income decreasing with each wave.

“We saw people become less frightened about spending as we moved from February to November last year,” says Wornell. “I expect that if this positive feeling continues, there will be an even more favourable spending outlook this year.”

It is no secret that footfall and revenues have plummeted for many businesses in the entertainment and restaurant sectors during the recession’s peak. But marginal improvements indicate glimpses of a recovery. In January 2010, 44% of people said they would cut back on dining in formal restaurants. While it hardly sounds glowing, this has improved from 51% in May 2009.

Surprisingly, fine dining has seen a greater improvement than the fast-food restaurant sector. While 44% of people said they would cut back on these purchases in January, this figure only stood at 48% last May. This means the improvement is just four percentage points compared with the seven for formal dining.

Eating out in chain restaurants had the best standalone results in this sector for January 2010 – 38% compared with 43% in May 2009. “Although the outlook appears negative it shows an improving trend,” Wornell notes.

People have also become more willing to pay for days out at paid attractions. This sector has experienced a more robust bounceback than its entertainment industry counterparts. Its result of 38% of people in January saying they would cut back, while still negative, is a significant improvement from 47% in March last year. Wornell argues that the reality is probably even better than this/ “A lot of paid attractions have benefited from people holidaying in the UK, as a lot of Brits holidayed ’at home’ last year. I think the reality is better than the result we see here.”

In line with this positive trend, the theatre/concert and cinema sectors have experienced better results overall than were seen last year. The scores have improved from 44% and 41% respectively in March 2009, to 33% and 30% in January 2010. Those who said they would slash their spending on watching sport events has improved from 46% to 38%. “The shift for the cinema sector is understandable as people regard it as a fairly cheap indulgence,” says Wornell.

People are also slowly returning to treating themselves to a holiday. All holiday sector trends show an upward journey, with the exception of business travel, which saw a two percentage point rise in the amount of people intending to cut this expense, reflecting that businesses are still wary of their costs.

People are loosening their purse strings for a longer holiday abroad, claims Wornell: “People are beginning to feel this is something they don’t want to cut back on. We are less inclined to cut back on our holiday than we are on week to week entertainment.”

The number who said they would cut back on longer holidays abroad has declined from 41% in March 2009 to 32% in January.

Short holidays abroad are also becoming more popular again as perhaps people perceive these breaks as an affordable luxury. This sector improved by nine percentage points with just 34% in January saying they would reduce spending in this area.

The word “staycation” may have embedded itself in public vernacular as the affordable holiday option for cash-strapped Brits, but the outlook for holidays in the UK is less impressive than for holidays abroad. Those cutting back on longer UK holidays dropped from 37% in March 2009 to 30% in January, while short UK holidays improved from 34% to 28%.

While conditions in the charity sector remain less than ideal, the trend indicates it is gradually recovering from the massive decline in donations it suffered last year. Just 20% of people said they would reduce their spending in this area, compared with 30% in March 2009.

Gym memberships may have been an easy item to strike off the expense list in a time of financial crisis, but prodigal gym goers are steadily returning. While 36% vowed to cut back in March 2009, a more positive 29% said they would do so in January. Cultural organisations may also have been in dire straits last year, but are welcoming their supporters back at about the same rate.

“The three areas of culture, gym and charity are the main things people cut back on when they start to feel cautious about the future, rather than because they actually have less pounds in their pocket,” Wornell notes. “But these are all fairly worthy things to do that give you a warm glow, not just a full belly. That’s the difference between these and entertainment, which is about pure indulgence. That’s the reason for the difference in results. I would expect this trend to continue.”

Consumers are feeling less under pressure to hold tightly on to their funds as the recession’s worst case scenarios appear to have been held at bay, for now. Wornell explains: “Saving activity peaks in a recession and declines in boomtime. If you feel less confident, you want to put more away for the future. As your confidence returns, that pressure is eased and you can spend a bit more.”

the frontline



Celia Pronto

Marketing director, STA Travel

The trends we have seen are consistent with the BDRC survey. There is definitely a feeling of being tired of austerity and cutting back.

A trend in the youth market is people trying to stay in education for longer to insulate themselves from the recession. A key part of that is travel.

In the young professional market, those being made redundant are using the opportunity to take time out – getting working holiday visas to places like Australia and New Zealand. And people who have holidayed at home since the recession have started to get fed up and feel like they deserve to go on a longer trip abroad.

The fact it has never been easier to travel and there have been some phenomenal promotions in this market has helped this along. As long as there are no major surprises with the budget and the economy, I can’t see that these trends would go back the other way.



Decrease in number of people planning to cut back on charity donations

Decrease in number of people planning to cut back on cinema visits

Decrease in number of people planning to cut back on long-haul holidays abroad

Decrease in number of people planning to cut back on gym membership

Decrease in number of people planning to cut back on fine dining



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