Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- The state of the UK economy
- The economy remains flat…
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- Figure 1: Quarterly change in UK GDP, Q1 2008-Q4 2012
- …but employment is up, and the income squeeze is easing
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- Figure 2: The income squeeze – increases in the cost of living and the growth in average wages, January 2007-October 2012
- Consumers’ current financial situation
- Some sign of financial recovery…
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- Figure 3: Household financial situation index, February 2009-December 2012
- …but the income squeeze is having an impact on consumers
- Spending priorities
- Safety first…
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- Figure 4: Financial priorities for 2013, December 2012
- …but still room for some luxury spending
- Financial expectations
- Macroeconomic expectations
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- Figure 5: Economic expectations, December 2012
- Personal financial expectations
- Little belief that the feelgood factor will be returning soon
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- Figure 6: Views on when the feelgood factor will return to the economy, December 2012
- What we think
Issues in the Market
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- How has sentiment changed over the last year?
- How well have people adjusted to the new economic environment?
- Who has been hardest hit by the slowdown?
- Are people prepared to start spending again?
Trend Application
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- Let the app take the strain
- Getting the most of your luxury spending
- The financial generation gap
Economic Conditions and Outlook
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- Key points
- UK economy walking the thin line between recovery and recession
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- Figure 7: Quarterly change in UK GDP, Q1 2008-Q4 2012
- Unemployment drifts downwards…
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- Figure 8: Seasonally adjusted unemployment rate, Q1 2008-Q3 2012
- …but youth unemployment remains problematic
- Limited scope for the government to boost spending
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- Figure 9: UK government debt as a percentage of GDP, January 2008-October 2012
Consumer Finances
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- Key points
- A decade of stagnating real income
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- Figure 10: Real household income and expenditure per head, Q1 2003-Q3 2012
- Rising prices put the squeeze on consumer spending
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- Figure 11: The income squeeze – increases in the cost of living and the growth in average wages, January 2007-October 2012
- Consumers are repairing the damage done by boom-time spending habits
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- Figure 12: Household savings ratio, Q1 2008-Q3 2012
- The link between housing and savings
- People are still using their credit cards…
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- Figure 13: Gross new consumer credit (excluding student loans), January 2008-October 2012
- …but they’re making an effort not to rack up new debts
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- Figure 14: Net new consumer credit (excluding student loans), January 2008-November 2012
- The mortgage market shows the impact of the credit crisis
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- Figure 15: Secured lending, net and gross, January 2008-November 2012
Consumers’ Current Financial Health
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- Key points
- Some positivity, despite the income squeeze
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- Figure 16: Current financial situation, 2011 and 2012
- A sign that people have adjusted to austerity?
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- Figure 17: Household financial situation index, February 2008-December 2012
- US consumer confidence – a sign of things to come?
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- Figure 18: Current financial situation, US and UK comparison, December 2012
- The squeezed middle age groups
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- Figure 19: Current financial situation, by age and presence of children, December 2012
- The retired have scope to increase spending
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- Figure 20: Current financial situation, by working status, socio-economic group and household income, December 2012
Changes in Financial Wellbeing
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- Key points
- The income squeeze feeds through into consumer sentiment…
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- Figure 21: Change in financial situation over the last year, December 2012
- …but financial difficulties need to be seen in context
- Changes in responses highlight consumers’ new resilience
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- Figure 22: Change in financial situation over the past year, July 2011-December 2012
- Better times ahead for parents?
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- Figure 23: Change in financial situation over the last year, by age and presence of children, December 2012
- People on the margins have seen finances deteriorate further
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- Figure 24: Change in financial situation over the last year, by gender, working status and income, December 2012
Financial Priorities
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- Key points
- The first priority is financial stability
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- Figure 25: Importance of financial priorities, December 2012
- Close to the edge
- Some signs of a slow turnaround in sentiment
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- Figure 26: Importance of financial priorities, 2011 and 2012
- Is security the ultimate luxury in uncertain economic times?
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- Figure 27: Key financial priorities, by change in financial situation over the last year, December 2012
- Who is prepared to spend a bit of money on themselves?
- The recovery may boost saving as much at it increases spending
Challenges Affecting Household Finances
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- Key points
- Most people have noticed the impact of rising prices
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- Figure 28: Events that have affected household finances, December 2012
- Consumer responses reflect the lack of progress in the broader economy
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- Figure 29: Events that have affected household finances, 2011 and 2012
- Those who were already at the margins are most exposed to the slowdown
- Compensating for the price rises
Discretionary Spending – Past and Planned
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- Key points
- Still plenty of scope for discretionary spending…
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- Figure 30: Spending intentions, December 2012
- …and trend data show that people can still be tempted into impulse buys
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- Figure 31: Spending intentions compared to actual spending patterns, August and December 2012
- Qualitative research hints at the mood of prudence…
- …but there’s still room for luxuries
- Younger people place greater emphasis on experiences
- Discretionary spending shows a desire for indulgence
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- Figure 32: Discretionary spending, December 2012
Macroeconomic Expectations
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- Key points
- The consumer’s verdict: higher unemployment, higher taxes, lower growth…
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- Figure 33: Economic expectations, December 2012
- …but at least they’re not as bleak as they were in 2011
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- Figure 34: Net expectation of changes in selected macroeconomic measures, 2010-12
- ‘More of the same – hopefully’
- How much of the bad news gets through to consumers?
- The impact of economic news on people’s financial management
Personal Financial Expectations
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- Key points
- People expect stability for their own finances in 2013
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- Figure 35: Personal financial expectations, December 2012
- People are more optimistic about their finances in 2013
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- Figure 36: Net expectation of changes in selected personal financial measures, 2010-12
- Clearing debts to create a sense of security
- Pessimism – and optimism
The Return of the Feelgood Factor
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- Key points
- Few expect an immediate return of the feelgood factor
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- Figure 37: Views on when the feelgood factor will return to the economy, December 2012
- It’s hard to feel good when you’re worried about your job prospects
- Younger people are still full of hope
- People tend to expect more of the same – whether that’s good or bad
Appendix: Consumers’ Current Financial Health
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- Figure 38: Current financial situation, by demographics, December 2012
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Appendix: Changes in Financial Wellbeing
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- Figure 39: Change in financial situation over the last year, by demographics, December 2012
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Appendix: Financial Priorities
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- Figure 40: Most popular average importance of financial priorities, by demographics, December 2012
- Figure 41: Next most popular average importance of financial priorities, by demographics, December 2012
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Appendix: Challenges Affecting Household Finances
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- Figure 42: Events that have affected household finances – have had to spend more on the weekly shop, by demographics, December 2012
- Figure 43: Events that have affected household finances – a substantial rise in home energy costs, by demographics, December 2012
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- Figure 44: Events that have affected household finances – housing costs have increased, by demographics, December 2012
- Figure 45: Events that have affected household finances – employer has imposed pay cuts/pay freeze, by demographics, December 2012
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- Figure 46: Events that have affected household finances – employer has cut or plans to cut jobs, by demographics, December 2012
- Figure 47: Events that have affected household finances – experienced difficulty getting a mortgage/credit, by demographics, December 2012
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- Figure 48: Events that have affected household finances – been made redundant in the last two years, by demographics, December 2012
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Appendix: Discretionary Spending – Past and Present
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- Figure 49: Intentions to buy new clothes, by demographics, December 2012
- Figure 50: Intentions to add to my savings, by demographics, December 2012
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- Figure 51: Intentions to reduce non-mortgage debts (credit card, personal loan, overdraft etc), by demographics, December 2012
- Figure 52: Intentions to go to a concert/sporting event/theatre, by demographics, December 2012
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- Figure 53: Intentions to go out for an expensive meal, by demographics, December 2012
- Figure 54: Intentions to book a holiday, by demographics, December 2012
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- Figure 55: Intentions to spend money on my home (new kitchen, redecorate, new furniture etc), by demographics, December 2012
- Figure 56: Intentions to buy new electrical equipment (television, PC, games console etc), by demographics, December 2012
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- Figure 57: Intentions to buy major domestic appliance (washing machine, fridge etc), by demographics, December 2012
- Figure 58: Intentions to buy/replace my car, by demographics, December 2012
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Appendix: Macroeconomic Expectations
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- Figure 59: Economic expectations – interest rates, by demographics, December 2012
- Figure 60: Economic expectations – house prices, by demographics, December 2012
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- Figure 61: Economic expectations – unemployment, by demographics, December 2012
- Figure 62: Economic expectations – taxes, by demographics, December 2012
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- Figure 63: Economic expectations – the UK’s economic growth, by demographics, December 2012
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Appendix: Personal Financial Expectations
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- Figure 64: Economic expectations – your household’s income, by demographics, December 2012
- Figure 65: Economic expectations – your savings, by demographics, December 2012
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- Figure 66: Economic expectations – your debts, by demographics, December 2012
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Appendix: The Return of the Feelgood Factor
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- Figure 67: Views on when the feelgood factor will return to the economy, by demographics, December 2012
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