• Scottish consumer confidence fell by three percentages point in Q3 2021, to -12%, but remains in-line with pre-pandemic levels;

• Scots are less likely to be confident across a range of indicators, with confidence in consumers’ level of household disposable income experiencing the largest percentage drop to -27%, in contrast to the rest of the UK (-21%);
• Scots are less positive than the rest of the UK on the state of the economy, with confidence dropping by eight percentage points to -56%, in contrast with the UK, where confidence fell by seven percentage points to -45%;
• The Deloitte Consumer Tracker measures UK consumer confidence on a quarterly basis.

Scottish consumers were less confident than the rest of the UK across a range of measures in Q3, even as consumer confidence fell nationally for the first time this year, according to the latest Deloitte Consumer Tracker.

Overall confidence in Scotland was dented by reduced optimism around personal finances, specifically in the level of debt (down four percentage points to -3%) and household disposable income (down 16 percentage points to -27%). This compares (respectively) to -4% and -21%, nationally.

Ben Perkins, head of consumer research at Deloitte, commented: “Whilst overall UK confidence remains at the same level as Q3 2019, thus maintaining pre-pandemic confidence levels which returned last quarter, the end of furlough, removal of universal credit top-ups, and rising inflation have contributed to a quarterly fall for the first time this year.

“However, in an indication that prices in both discretionary and essential categories are also beginning to creep up, 36% of consumers across the UK said their overall spending had increased in the last three months. This was primarily driven by rising utility bills and transport spending as more workers returned to offices.”

The Deloitte Consumer Tracker has been measuring UK consumer confidence on a quarterly basis for ten years. The latest analysis is based on responses from a nationally representative sample of 3,185 UK consumers between 17^th and 20^th September 2021, including 289 in Scotland.

‘Candidates’ market’ softens falling sentiment on economy

Scottish consumers are more confident relative to the previous quarter when it comes to job security, which saw an increase of one percentage point to -5%. The current job market has buoyed consumers’ confidence as this indicator is up nine percentage points from the same period a year ago.

However, these figures are slightly lower than the UK average when it came to indicators around job opportunities and career progression relative to the previous quarter, which fell by one percentage point in Scotland to -9% but rose three percentage points to -4% across the UK.

Additionally, the UK workforce itself remains significantly smaller than it was before the COVID-19 pandemic began, posing additional headwinds to wider supply chain challenges.

Ian Stewart, chief economist at Deloitte, commented: “The dislocation of the last 18 months has created a huge supply-demand mismatch. A year ago the central economic problem was excess capacity and too few jobs; now it is insufficient capacity and too many jobs. With inflation well above its 2.0% target, and likely to rise further, the stage looks set for the Bank of England to raise interest rates by the end of this year.”

Record discretionary spend driven by leisure consumers

Scottish consumers tipped discretionary spending into positive territory in Q3, to +1%, for the first time since the Deloitte Consumer Tracker began ten years ago. Consumer enthusiasm for leisure spending following Q2’s reopening of the economy continued into the third quarter, aided by the reopening of more international borders. Strong spending was seen across almost every leisure subsector, including attending live sports events and eating out, both of which saw increases in Scotland of eight and seven percentage points, respectively.

Scottish sentiment was also increasingly positive around the prospect of long holidays over the next three months, rising by 15 percentage points.

With more consumers heading out, in-home leisure and betting and gaming expenditure both decreased from the previous quarter, in line with the rest of the UK.

Simon Oaten, partner for hospitality and leisure at Deloitte, said: “Following the reopening of the hospitality sector, hotels and restaurants have quickly found that amid the strong consumer demand, one of the key challenges to its recovery has been staffing.

“Hospitality businesses across the UK have been more than twice as likely as other industries to be experiencing challenges in filling vacancies compared with normal expectations for this time of year. This is particularly challenging as these businesses want to put good, personalised customer service at the centre of their post-pandemic offering and the lack of staff hinders this effort.”

Consumers primed to spend early for Christmas

Scottish respondents indicate that they expect to reduce their spending over the next three months, including over the festive period, from its current peak, with consumers’ discretionary spending in Q4 anticipated to fall by six percentage points compared to Q3. This trend is in line, albeit a deeper drop, with the rest of the UK where spending is anticipated to fall by five percentage points. This represents a ‘normalisation’ of spending patterns going into the retail sector’s ‘golden quarter’, coming down from second and third-quarter highs.

Perkins added: “Following the cancellation of many Christmas plans last year due to the pandemic, consumers demand remains very strong and many will be looking to make up for missed celebrations. However, consumer behaviours are already reflecting concerns on the availability of some goods, with early birds already making a start on their Christmas shopping to avoid possible disappointment.

“For retailers, an extended Christmas shopping period is in many ways beneficial, spreading demand over a longer period, smoothing peaks and potentially reducing the need for price discounting. In anticipation of ongoing supply chain disruption, some retailers have brought Christmas merchandise to shop floors earlier to ensure consumers can find what they need for the festive period. However, others may be subject to longer-term disruption, potentially creating shortages in more popular party season and gifting categories, including clothing, toys, and furniture.”