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Consumers and The Economic Outlook - UK - January 2010

This report looks to understand what the recession has meant for consumers – how they are managing their finances, whether they struggling to make ends meet and how confident they are about their prospects in the coming year. It also investigates people’s view of the economy as a whole.

  • The recession has followed a dramatically different pattern to that seen in the early '90s. Because of low interest rates, almost a fifth of people say they're actually better-off as a result of the slowdown.
  • They expect the coming year to be tough, though. There's a general expectation that interest rates, unemployment and taxes will all finish 2010 higher than they started the year.
  • Saving is high on the agenda. Two-fifths of consumers say that in 2010 they plan to build an emergency fund, well above the proportion who say that they are going to concentrate on enjoying themselves and enjoying the occasional luxury.
  • Mintel has identified three distinct groups. Most are Weathering the Storm - concerned about their finances, but not panicking. A quarter, though, are Thriving. They're confident about their financial future and most have money left at the end of the month.
  • The Thriving appear to be reaping the rewards of the prudent approach to their money that they took in 2009, with holidays and leisure spend towards the top of their list of priorities.
  • Most of the pain has been concentrated among those who are classed as Feeling the Pinch. For them, 2010 is going to be about rebuilding their finances. Just making ends meet is their main priority, followed closely by repaying consumer credit.

Mintel's Special Report Series are unique research findings that shed essential light on British attitudes, hopes, fears and desires.

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Table of contents

  1. Issues in the Market

      • Key issues covered in the report
        • Abbreviations
        • Future Opportunities

          • An escape from the gloom of the slowdown…
            • …and a return to stability for many
              • Not everyone is buying into the new prudent mindset
                • When will reality hit home for the younger generation?
                • Market in Brief

                  • An unusual recession
                    • Half of the population are pretty much unaffected by the slowdown…
                      • Figure 1: Impact of the downturn, November 2009
                    • …and two thirds describe their financial situation as fairly stable
                      • Figure 2: Personal financial situation, November 2009
                    • Watchful, but not panicking
                      • ‘Business as usual’ for most people
                        • Figure 3: The slowdown segmentation, November 2009
                      • Saving is at the top of the agenda for 2010
                        • Figure 4: Financial priorities over the previous year and coming year, November 2009
                      • Politicians’ tough talk is filtering through
                        • Figure 5: Expectations of macroeconomic changes, November 2009
                      • Debt repayment still on the cards?
                        • Figure 6: Expectations of household financial changes, November 2009
                    • Background to the Credit Crisis

                      • Key points
                        • Recession timeline – from panic to acceptance
                          • Figure 7: Major financial and economic developments, 2006-09
                        • Roots in lax lending…
                          • …but the recession is about much more than that
                            • The impact on the UK
                              • The banking crisis turns into a full-blown recession
                                • Authorities attempt to boost the economy
                                • Broader Economic Climate

                                  • Key points
                                    • Key macroeconomic indicators
                                      • RPI returns to positive territory
                                        • Figure 8: BoE base rate and RPI, 2003-09
                                      • Unemployment ticks upwards
                                        • Figure 9: Unemployment levels, seasonally adjusted, 2003-09
                                      • The housing market
                                        • A remarkable recovery in house prices…
                                          • Figure 10: Annual house price changes, Nationwide and Halifax indices, 2002-09
                                        • …but one that’s built on low volumes
                                          • Figure 11: Mortgage approvals, 2002-09
                                        • Consumer credit and saving
                                          • A greater focus on saving – or at least on not spending
                                              • Figure 12: The UK savings ratio, 1990-2009
                                            • Further signs of a new prudence?
                                              • Figure 13: Gross new consumer credit, 1999-2010
                                              • Figure 14: Gross new credit card lending and amount outstanding, 2003-09
                                            • Insolvencies jump in the second half of 2008
                                              • Figure 15: Individual insolvencies in England and Wales (seasonally adjusted), Q1 2002-Q2 2009
                                          • Then and Now – Parallels with 1991-95

                                            • Key points
                                              • How are the comparisons changing?
                                                • A longer and more severe recession than the 1990s
                                                  • Figure 16: Quarterly GDP change, 1986-95 and 2003-09
                                                • No more levers left to pull?
                                                    • Figure 17: Average Bank of England base rate, 1986-95 and 2003-09
                                                  • House prices avoid the paralysis seen in the 1990s
                                                    • Figure 18: House price changes, 1986-95 and 2003-09
                                                  • Unemployment – can it confound economic history?
                                                    • Figure 19: UK unemployment, 1986-95 and 2003-08
                                                • Consumer Sentiment

                                                  • Key points
                                                    • Consumer confidence bounces back
                                                        • Figure 20: UK consumer confidence index, 2000-10
                                                      • A good time to spend?
                                                          • Figure 21: Spending and saving confidence, March 2001-December 2009
                                                        • Intended financial activity increases – with debt the priority
                                                          • Figure 22: Savings, investment, borrowing and debt repayment – consumers’ expected activity, Jun 02-Dec 09
                                                        • House prices – further signs of a fragile market?
                                                          • Figure 23: Expected mortgage and property purchase activity, Q3/Q4 2002-Q3/Q4 2009
                                                      • Consumers’ Financial Confidence and Future Prospects

                                                        • Key points
                                                          • Healthy – or in trouble?
                                                              • Figure 24: Personal financial situation, November 2009
                                                            • Still waiting on the consumer recession?
                                                              • Figure 25: Personal financial situation, December 2008-November 2009
                                                            • The young, the old and the affluent – insulated from the slowdown?
                                                                • Figure 26: Personal financial situation, by age and socio-economic group, November 2009
                                                              • Worried – but not yet panicking
                                                                  • Figure 27: Financial prospects, November 2009
                                                                • Measured optimism?
                                                                    • Figure 28: Financial prospects, December 2008-November 2009
                                                                  • Affluence and security
                                                                      • Figure 29: Financial prospects, by age and socio-economic group, November 2009
                                                                  • Impact of the Recession on Consumers

                                                                    • Key points
                                                                      • Have people even noticed the crunch?
                                                                          • Figure 30: Impact of the downturn, November 2009
                                                                        • Mortgage holders feel the benefit…
                                                                            • Figure 31: Impact of the downturn among mortgage holders, November 2009
                                                                          • …but older people are suffering
                                                                            • Figure 32: Impact of the downturn, by age and socio-economic group, November 2009
                                                                        • Are Consumers Thriving, or Feeling the Pinch?

                                                                          • Key points
                                                                              • Figure 33: The slowdown segmentation, November 2009
                                                                            • Making ends meet – but risking slipping into the red
                                                                                • Figure 34: Financial situation, by target groups, November 2009
                                                                              • Professionals and older people are thriving
                                                                                  • Figure 35: Target groups, by age and socio-economic group, November 2009
                                                                                • Footloose and fancy-free
                                                                                  • Figure 36: Target groups, by children in household and working status, November 2009
                                                                                • The security of savings
                                                                                    • Figure 37: Financial products owned, by target groups, November 2009'
                                                                                  • Employment is the key
                                                                                      • Figure 38: Change in employment situation in the last year, by target groups, November 2009
                                                                                  • Managing Money in a Slowdown

                                                                                    • Key points
                                                                                      • A nation of money managers?
                                                                                        • Figure 39: Attitudes towards managing your money, November 2009
                                                                                        • Figure 40: Attitudes towards managing your money, by money management target groups, November 2009
                                                                                      • Are the Spendthrifts attempting to avoid facing up to reality?
                                                                                        • Figure 41: Financial situation at the moment, by money management target groups, November 2009
                                                                                      • On top of their finances, but worried about what’s to come…
                                                                                        • Figure 42: Confident about financial situation over the next year, by money management target groups, November 2009
                                                                                      • …and already feeling the impact of the slowdown
                                                                                        • Figure 43: Impact of economic downturn on overall financial situation, by money management target groups, November 2009
                                                                                      • Young and carefree
                                                                                          • Figure 44: Money management target groups, by gender, age, working status and socio-economic group, November 2009
                                                                                      • Consumers’ Changing Financial Priorities

                                                                                        • Key points
                                                                                          • Time to take control of money…
                                                                                              • Figure 45: Financial priorities over the previous year and coming year, November 2009
                                                                                            • …but will the New Year resolutions stick?
                                                                                              • The Thriving – is the hard work over?
                                                                                                  • Figure 46: Financial priorities over the last year/change in financial priorities over the next year, by target groups, November 2009
                                                                                                • The cost of the recession on long-term planning
                                                                                                    • Figure 47: Financial priorities over the last year/change in financial priorities over the next year, by impact of economic downturn on overall financial situation, November 2009
                                                                                                  • The Worriers looking to escape the debt trap
                                                                                                      • Figure 48: Financial priorities over the last year/change in financial priorities over the next year, by money management target groups, November 2009
                                                                                                    • Debts a priority for the ‘making ends meet’ generation
                                                                                                      • Young and old plan to spend on themselves
                                                                                                          • Figure 49: Financial priorities over the last year/change in financial priorities over the next year, by age, November 2009
                                                                                                        • Easier to take a long-term view when the short term is sorted
                                                                                                            • Figure 50: Financial priorities over the last year/change in financial priorities over the next year, by socio-economic group, November 2009
                                                                                                        • Consumers and the Macroeconomic Climate

                                                                                                          • Key points
                                                                                                            • A recognition of the tough times to come
                                                                                                                • Figure 51: Expectations of macroeconomic changes, November 2009
                                                                                                              • Life’s hard for some – and it’s going to get harder
                                                                                                                  • Figure 52: Expectations of macroeconomic changes, by target groups, November 2009
                                                                                                                • Do personal circumstances colour macro views – or vice versa?
                                                                                                                  • Tailoring the message to fit the mindset
                                                                                                                      • Figure 53: Expectations of macroeconomic changes, by financial confidence, November 2009
                                                                                                                    • Regional variations hint at different perspectives…
                                                                                                                      • …and older people show the benefit of a bit of perspective
                                                                                                                          • Figure 54: Mean expectations of macroeconomic changes, by gender, age, region and socio-economic group, November 2009
                                                                                                                      • Consumers and their Household Finances

                                                                                                                        • Key points
                                                                                                                          • Incomes up, debts down…
                                                                                                                              • Figure 55: Expectations of household financial changes, November 2009
                                                                                                                            • …but are people expecting their savings to be hit?
                                                                                                                                • Figure 56: Expectations of household financial changes, by impact of the slowdown, November 2009
                                                                                                                              • Robbing Peter to pay Paul
                                                                                                                                  • Figure 57: Expectations of household financial changes, by target groups, November 2009
                                                                                                                                • Will younger people face a reality check?
                                                                                                                                  • Figure 58: Expectations of household financial changes, by gender, age, region and socio-economic group, November 2009
                                                                                                                              • Household Discretionary Spend

                                                                                                                                • Key points
                                                                                                                                  • Saving cash – the new leisure activity?
                                                                                                                                    • Figure 59: Discretionary spending, March and November 2009
                                                                                                                                  • Affordable treats for those who are feeling the pinch
                                                                                                                                    • What are the essential inessentials?
                                                                                                                                      • Figure 60: Discretionary spending, by target groups, November 2009
                                                                                                                                    • Spendthrifts showing little sign of cutting expenses
                                                                                                                                      • Figure 61: Discretionary spending, by money management target groups, November 2009
                                                                                                                                  • Appendix – Consumers’ Financial Confidence and Future Prospects

                                                                                                                                    • Current financial situation
                                                                                                                                      • Figure 62: Financial situation at the moment, by demographics, November 2009
                                                                                                                                    • Confidence over the coming year
                                                                                                                                      • Figure 63: Confident about financial situation over the next year, by demographics, November 2009
                                                                                                                                  • Appendix – Impact of the Recession on Consumers

                                                                                                                                      • Figure 64: Impact of economic downturn on overall financial situation, by demographics, November 2009
                                                                                                                                  • Appendix – Are Consumers Thriving, or Feeling the Pinch?

                                                                                                                                      • Figure 65: Target groups, by demographics, November 2009
                                                                                                                                  • Appendix – Managing Money in a Slowdown

                                                                                                                                      • Figure 66: Money management target groups, by demographics, November 2009
                                                                                                                                  • Appendix – Consumers’ Changing Financial Priorities

                                                                                                                                      • Figure 67: Most popular financial priorities over the last year, by demographics, November 2009
                                                                                                                                      • Figure 68: Next most popular financial priorities over the last year, by demographics, November 2009 (continued)
                                                                                                                                      • Figure 69: Most popualr change in financial priorities over the next year, by demographics, November 2009
                                                                                                                                      • Figure 70: Next most popualr change in financial priorities over the next year, by demographics, November 2009 (continued)
                                                                                                                                      • Figure 71: Financial priorities over the last year/change in financial priorities over the next year, by financial situation at the moment, November 2009
                                                                                                                                      • Figure 72: Financial priorities over the last year/change in financial priorities over the next year, by confident about financial situation over the next year, November 2009
                                                                                                                                      • Figure 73: Financial priorities over the last year/change in financial priorities over the next year, by impact of economic downturn on overall financial situation, November 2009
                                                                                                                                  • Appendix – Consumers and the Macroeconomic Climate

                                                                                                                                      • Figure 74: Expectations of macroeconomic changes, by demographics, November 2009
                                                                                                                                  • Appendix – Consumers and their Household Finances

                                                                                                                                      • Figure 75: Expectations of household financial changes, by demographics, November 2009

                                                                                                                                  Companies Covered

                                                                                                                                  • Aldi Stores Ltd (UK & Ireland)
                                                                                                                                  • Asda Group Ltd
                                                                                                                                  • Bank of England
                                                                                                                                  • Bradford & Bingley plc
                                                                                                                                  • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                  • Co-operative Group
                                                                                                                                  • Council of Mortgage Lenders
                                                                                                                                  • Fannie Mae
                                                                                                                                  • Gfk NOP
                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                  • International Monetary Fund
                                                                                                                                  • J. Sainsbury
                                                                                                                                  • John Gilbert Financial Research
                                                                                                                                  • Lehman Brothers [UK]
                                                                                                                                  • Lidl (UK)
                                                                                                                                  • Marks & Spencer
                                                                                                                                  • Northern Rock plc
                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                  • T-Mobile (UK) Ltd
                                                                                                                                  • Tesco Plc
                                                                                                                                  • The Royal Institution of Chartered Surveyors
                                                                                                                                  • Virgin Media Ltd
                                                                                                                                  • Virgin Mobile
                                                                                                                                  • Vodafone Group Plc (UK)
                                                                                                                                  • Waitrose
                                                                                                                                  • Wm Morrison Supermarkets
                                                                                                                                  • Zavvi

                                                                                                                                  Consumers and The Economic Outlook - UK - January 2010

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