Consumer pessimism about the UK’s economic recovery hit an all-time high in April 2022. Nearly 35% of UK consumers say they believe the economy will show regression or fall into a lengthy recession. This lack of confidence in the UK’s economic recovery has more than doubled since October 2021 when economic pessimism was at 17%, having dropped from 30% in March 2020. These insights are part of McKinsey & Company’s latest European Consumer Pulse Survey, which has charted analysis of consumer sentiment – how they’re feeling, shopping, and spending – since the onset of the pandemic across the UK, Germany, France, Italy and Spain.
Six in ten (60%) UK consumers say their biggest concern right now are the rising prices, followed by the invasion of Ukraine (15%) and Covid-19 (7%). Confidence in economic recovery is amid the uncertainty over petrol supply to the UK (53%), energy shortages (43%), supply chain shortages (40%), rising interest rates (33%) and food shortages (31%) – as the primary topics of concern.
In turn, consumers are spending less and are trading down. Almost two-thirds (64%) of consumers say they have tried a new shopping behaviour in recent weeks and 34% have tried private label brands and 28% shopped at a different retailer to their usual one. On the flip side, discounters were the only retail format to gain shoppers, seeing a net increase of 22%, as consumers traded down. Comparatively, convenience stores saw a 32% net decrease, hypermarkets (25%), specialist grocery stores (20%) and supermarkets (9%).
One sector that may face some headwinds is the hospitality sector as 44% of UK consumers say they plan to spend less at quick-service restaurants, restaurants and on food takeout and delivery. When asked about shopping intent for the next four to six weeks, consumers said they were planning to spend less, resulting in an expected net reduction in spend of 39% for quick-service restaurants, 35% for restaurants and 33% for food takeout and delivery.
Other key findings from the consumer sentiment research include:
- Rising prices and the invasion of Ukraine more of an economic concern than Covid-19. Six in ten (60%) UK consumers cited rising prices as their top concern, the invasion of Ukraine as their second concern (15%), followed by the pandemic (7%), unemployment (4%), extreme weather/climate change (3%) and Brexit (2%). Comparatively, 39% of all European consumers cited rising prices as their top concern, the invasion of Ukraine their second (21%), followed by the Covid pandemic (7%), unemployment/job security (6%) and extreme weather/climate change (5%).
- Spain, Italy, and UK consumers are least confident about their own country’s economic status. Two in three (61%) of European consumers surveyed had a negative perspective about their own country’s state of the economy. The negative outlook is the highest in Spain at (67%), followed by Italy (63%), UK (61%), France (58) and Germany (55%). 71% UK adults aged 42-57 (Generation X) had a negative outlook on the current state of the economy, followed by 62% of millennials. This falls to 58% for Baby Boomers and 49% for Gen Zers.
- Pessimism over the UK’s economic recovery hits highest level since the first lockdown in March 2020. 35% of UK consumers now believe that the economy will show regression or fall into a lengthy recession, due to the potential economic impact related to the invasion of Ukraine. 49% of consumers believe the economic impact will last 6-12 months, while 16% have a more positive outlook, believing the economy will re-bound in two to three months.
- Low-and high-income earners are equally worried about rising prices. 65% of high-income earners (those earning over £50,000 per annum) and 63% of those on a low income (less than £25,000) share a similar negative economic outlook. Middle-income earners (those earning £25,000 -£50,000) are slightly less worried, with 57% having a negative outlook.
- The strongest perception of price increases was in groceries, with most believing rises will continue. Most consumers (92%) perceived price increases in groceries, 74% in household supplies and 68% in pet food. Most consumers (71%) also believe prices will continue to rise in the next 12 months. As a result of price rises, 61% of consumers became more conscious about home energy usage and plan to reduce savings and non-food spend.
- When shopping for groceries and other essentials, a large proportion of consumers are trading down. A large proportion of consumers (74%) are switching to lower cost brands/private labels in household products, 70% of consumers planned to switch to a lower cost brand for snacks, and confectionary, 70% for frozen foods, 62% for bread and bakery and 61% for healthcare, beauty & baby. However, only 44% of consumers switched to a lower cost alcohol brand in the last four to six weeks.
For more insights see European Consumer Sentiment Survey May 2022.