Consumer confidence soared in December – but will it last?

As Britain rolled out its first Covid-19 vaccinations and traded lockdown for a more relaxed Tier system in early December, consumer confidence rose up to its highest level since February.

According to the latest analysis by YouGov and the Centre for Economics and Business Research (Cebr), consumer confidence increased to 102.9. Any figure over 100 means more consumers are confident than not.

However, the research was carried out before a new strain of Covid-19 was identified and the tightening of restrictions that followed.

The outlook for business activity – which asks workers if they think activity at their workplace will increase or decrease in the next 12 months – showed the strongest improvement, rising to 118, its highest level since November 2018.

A greater number of households also said their finances had improved, but at 90.8 the measure still shows that more Britons than not say they’re worse off.

Darren Yaxley, director of reputation research at YouGov, said the index shows that Brits have an increasingly positive outlook for 2021, but that’s likely to take a dip after tougher restrictions were brought in after the research was undertaken.

“While these metrics and the overall index indicate hope towards the end of 2020, home value and job security indicators declined – something that is likely to fall further after the announcement of the new strain of coronavirus and subsequent restrictions before Christmas.”

Andrew Goodacre, chief executive of the British Independent Retailers Association (Bira) agreed that new lockdown measures are likely to damage consumer confidence.

“The problem this time is that it is the third such lockdown, and on this occasion there is no predetermined end date. The news is largely negative, the economy is not having time to recover and so consumers become nervous,” he said.

IGD’s latest shopper confidence survey shows just how volatile consumer confidence was in December. The research found that while sentiment remained at its highest level since February across the month, the score dropped significantly following the introduction of tougher Tier restrictions, particularly in London and the South East. However, the survey also found that trust in the food industry had increased to the highest level since June 2020.

Andrew stressed the importance of the vaccine rollout in bolstering consumer confidence in the months ahead. “It is important that there is a clear vision of what it will take to move out of lockdown, and how that can be achieved. The vaccine provides hope, and I urge the government to really deliver the vaccines as quickly as possible as the quicker we do it, the quicker we restore confidence,” he said.

Kay Neufeld, head of macroeconomics at Cebr, noted that UK households put away nearly 17% of their incomes in Q3. “This has further swelled the nation’s savings buffer, which Chancellor Rishi Sunak hopes will be used to kick-start a consumption-driven recovery. Having said that, the latest tightening of restrictions in the South and news of a new coronavirus strain still have the potential to derail consumer confidence over the winter,” Kay said.

Consumer sentiment is an important predictor of spending, and for independent retailers, these figures show the fragility of the budding confidence among Britain’s shoppers. While spending on food rocketed in November and December, and speciality food retailers are particularly well-placed to make a success of the fresh lockdown restrictions, the months ahead are sure to bring more uncertainty for the industry.