Consumer confidence rises as summer holiday season begins

Seven in ten people are set to holiday, though 75% of those are finding ways to cut travel costs compared to their last trip, according to new KPMG research.

The number of people feeling financially secure has risen this quarter by three percentage points to 58%, whilst confidence that the UK economy is improving has risen to 17% from one in ten three months ago.

Half of consumers (50%) also report being able to spend freely. But 14% of those surveyed say they are still having to actively cut their discretionary spending to pay for their essentials, while a further 3% are incurring debt to do so.

Despite the quarterly improvement in economic confidence, half of the people (51%) feel that the economy is still worsening (but fewer than the 58% said so last quarter).

Most commonly those saying that the economy is getting worse cite the cost of their groceries (79%), utilities (74%), and the general state of public services where they live (42%), as reasons why they feel that way.

Responding to the findings, Linda Ellett, Head of Consumer, Retail and Leisure at KPMG UK, said “Consumer confidence has rallied over the last quarter and only a fifth of consumers now feel insecure about their financial circumstances. Businesses will be hoping that this improvement brings about increased spending confidence during the summer months. But macroeconomic confidence still looms large, with half of consumers still to be convinced that the economy isn’t worsening.”

Despite the mixed opinions on the economy, confidence in personal financial management means that seven in ten people say they will holiday this summer, with 34% holidaying in the UK, 21% holidaying abroad, whilst 15% holidaying in both the UK and abroad.

But in the face of an elevated cost of living, which includes rises in some essential bills during the last three months, 75% of those going on holiday are taking steps to reduce the cost of travel, where possible, compared to their last holiday, with 20% going for fewer nights. 19% going self-catering.

17% are using a lower-cost airline, whilst 16% are controlling cost by using an all-inclusive, full or half board deal.

14% staying in a lower-star-rating hotel, with a further 14% booking joint accommodation with family or friends.

Only 5% of consumers say they have chosen to spend more on this year’s summer holiday, while 20% say their holiday will cost around the same amount as last year.

Taking children on holiday during term time is another tactic being deployed to lower the cost of holidaying, with a third (33%) saying their child(ren) will miss some term-time in order to holiday this year, while one in five (20%) said their whole holiday would be taken during term-time.

Among consumers not taking a holiday this summer, a fifth had either already been on holiday or will go after summer is over, or both. Four in ten (41%) of those not taking a trip away this summer say it is due to them not being able to afford to, while a quarter (23%) don’t want to go on holiday this year.

In addition to direct travel-related spend and the knock-on benefit of people holidaying in the UK, the demand for travel this summer could also bring a boost to the retail sector, with 77% of people expecting to buy items for their holiday, including 41% of those taking a holiday saying they plan to buy new clothing and 25% new footwear. Only 16% of consumers said that they won’t be spending on summer goods or experiences this year.

Reacting to the findings, Linda Ellett, Head of Consumer, Retail and Leisure at KPMG UK, said “Summer holiday demand looks very healthy, bringing direct and indirect benefit to the UK retail and leisure sectors. Many households have prioritised discretionary spend for their holiday but, considering both household essential costs and the price of travel have increased, it is little surprise to see three quarters of holidaymakers are still taking a variety of steps to get the cost of their break down where they can.”