UK consumer confidence remained virtually unchanged in the final quarter of 2024, with a marginal -0.2 percentage point drop, according to the latest Deloitte Consumer Tracker. And that’s not a positive sign, given it’s the first time confidence has stalled since 2022, it noted.

And while consumers spent more freely over Christmas, the outlook’s rather nervous from both a consumers and business perspective.

But the big reading, based on responses from 3,200 UK consumers aged 18+ between 3-6 January, showed sentiment towards personal levels of debt rose by a significant 6 percentage points this quarter compared with Q4 2023.

However, the improvement in confidence in debt levels didn’t compensate for a fall in sentiment towards disposable income with a four percentage points drop to -26%.

Overall consumer confidence in the state of the UK economy also fell significantly in Q4 (-13.6 percentage points), indicating that consumers are nervous about the impact of higher business taxes on their income and prices at the till. 

It also said the sentiment of senior business leaders weakened in Q4 as CFOs expect to introduce cost-cutting measures in the next 12 months, “including the sharpest fall in hiring expectations since the pandemic”.
 
Meanwhile, consumer sentiment towards job security and job/career opportunities also fell in the final quarter (-1.0 and -0.8 percentage points respectively) in a sign that consumers are also concerned about the prospects for the jobs market.

But back to what happened in Q4 and the report showed that during Christmas, 42% of consumers said that they spent more than they did in the previous year, “in a sign that consumers are loosening their purse strings”.

While 35% said they spent more on gifts, 54% who spent more this Christmas overall attributed it to higher prices. Similarly, 44% of consumers said they had less to spend, “signalling that increased expenditure was not necessarily a sign of consumers’ propensity to spend more”.

Some 40% also said they did their Christmas shopping before December, “which could have been a tactic to spread the cost of the festive season”. Over a third (37%) said they bought more gifts on discount including at Black Friday events and more food (43%) using promotions and loyalty cards discounts.

Some 52% agreed that they were generally more frugal and careful this Christmas, while 50% agreed they consciously cut down on any luxuries.

But the level of discretionary spending in the last three months “continued into positive territory following several years of negative growth”, noted Deloitte.

Céline Fenech, consumer insight lead at Deloitte, said: “While many consumers appear to be feeling better about paying debts or borrowing following the cuts to interest rates, concerns around disposable income and prices of essentials remain.

“Consumers continue to look for value and make compromises following a once in a generation surge in costs that has diminished consumers’ spending power. Many consumers continue to compare today’s higher prices to those of pre-pandemic, regardless of the rate of inflation falling.”
 
She added: “We expect consumer confidence to continue to recover this year alongside improving economic conditions. For their confidence to improve further, consumers will want to see what happens next to the cost of financing their debts, their ability to save, the prices of essential items and their job security.”

Ian Stewart, chief economist at Deloitte, added: “Growth has been more sluggish than expected in recent months and our survey of CFOs shows that finance leaders are feeling less optimistic and are focused on reduced costs. Despite a challenging start to the year, we expect to see growth coming back over the summer, with interest rate cuts, rising real incomes and buoyant government spending helping drive the recovery. For 2025 as a whole we expect UK GDP growth to come in at around 1%, a rather better outcome than last year.”
 
Oliver Vernon-Harcourt, head of retail at Deloitte, concluded: “As many grapple with an inflation hangover, consumers likely need more time to digest the volatility and uncertainty of the last few years. Consumer recovery this year will depend on what happens with inflation, especially in the more essential categories like food. With our research showing that 80% of consumers still expect prices to go up further in 2025, consumer demand is likely to remain subdued while things settle in the first half of the year.

“Beyond that, with factors such as the rise in the minimum living wage, more public spending, easing monetary and fiscal policies – combined with consumer confidence hopefully continuing to recover — we should see demand improving especially in the more discretionary categories.”