Scots less concerned with financial impact of Brexit but festive sales under pressure
Fewer Scots compared with last year are planning to change their spending habits as a result of Brexit with just 36% claiming to have been influenced by the UK’s prolonged EU departure plans, down from 46% in December 2018.
However, more than one quarter believe they will broadly be worse off generally in 2020 compared to this year, with Scotland’s high streets expected to feel the brunt of spending reductions in the run up to Christmas as consumers increase spending on everyday essentials, at the expense of socialising and fashion.
PwC’s latest consumer sentiment survey shows that 19% of Scots said they would be better off next year compared to this year, while 26% believe they will be worse off, giving a balance of -7 percentage points, in line with the UK overall.
Scotland appears to be relatively optimistic in its financial fortunes compared to many other parts of the UK. London is the only one of the 12 nations and regions in the UK to record a positive balance (+5pp) while Scotland is fifth in a table propped up by the South West, which recorded a balance of -23pp.
Almost one quarter (23%) of Scots surveyed said they would spend more on groceries in the coming year compared with 17% who will spend less in this area. At the other end of the chart, 23% said they would spend less on ‘going out’ against 7% who would increase spending in this area. One quarter said they would spend less on fashion compared to just 8% who expect to increase spending on the high street.
The survey found that while Scots are concerned about their disposable income, this does not directly correlate to the economic uncertainty perceived to have come from Brexit.
As the UK prepares to leave the European Union on October 31st, just 21% of Scots said Brexit has changed their spending habits over the last 12 months, down from 24% in December 2018. Of those who have not changed their habits in the last 12 months, 15% believe the next 12 months will see a change in the way they save and spend their disposable income – down seven percentage points from 22% in December. This leaves 64% who said their spending had not changed and would not change over the coming 12 months. In December the same question saw 54% expecting no change.
This autumn’s consumer sentiment survey found that, in the past 12 months, 79% of Scots have not changed their spending habits as a result of Brexit (75% in UK overall), with 21% saying they had made some changes.
Jason Higgs, consumer markets leader for PwC Scotland commented:
“Consumer sentiment in Scotland has remained resilient in the last few years, however we are seeing an increase in the number of people who expect to be worse off in the next 12 months, with 26% now predicting this for 2020. This looks likely to cause reductions in spending on key consumer markets such as high street retail, leisure and ‘big ticket’ items like furniture or home appliances.
“As retailers begin to turn their attention to the critical festive period, they could find trading conditions challenging as consumers cut back.
“Looking at where Brexit fits into the wider spending plans of Scots, while 34% said their spending habits would be affected by the UK’s departure from the European Union this is fewer than the UK overall, and leaves the majority of Scots expecting no impact on their spending habits from Brexit – in fact we have seen a 10 point increase, from 54% to 64%, in those who have not changed their spending habits and don’t expect to, as a direct result of Brexit.”
The outlook across the UK
Just over one-in-five UK consumers (21%) think they will have more disposable income in the coming year, while 28% expect their disposable income to fall – an eight percentage point decline in net sentiment since the same survey in April 2019. This means the Autumn consumer sentiment level is at its lowest ebb since 2014, and could see retailers and leisure operators impacted by shoppers reducing their festive budgets in the critical run up to Christmas.
Optimism levels among consumers vary significantly by age group. Sentiment has fallen most sharply among those aged 25 and under – down by 25 percentage points compared with April- although they still remain the most positive age bracket over all. In contrast, there has been a slight uptick in sentiment amongst 55-64 year olds since April, even though this age group remains the most pessimistic overall.
Lisa Hooker, consumer markets leader at PwC UK, said:
“Despite the political upheavals affecting the country, consumer sentiment has remained remarkably resilient over the past five years.
“While our survey shows a decline since we last measured sentiment in April, British consumers are still more positive about their personal prospects than immediately after the EU referendum, and significantly more positive than during the last recession and recovery period.
“However, where there has been a drop off in consumer confidence, it is largely concentrated amongst younger people, with a staggering 25 point decline amongst under 25 year olds, at a time of year when we have historically seen a bounce in sentiment in this age group.
“With Autumn sentiment at a five year low, retailers and operators in the leisure sector may face a challenging run up to the critical festive season, especially for those brands targeting younger consumers.”