Inspiring consumer confidence in challenging economic times. Graham Pickett Lead Partner Travel, Hospitality & Leisure June 2013

Transcription

1 Inspiring consumer confidence in challenging economic times Graham Pickett Lead Partner Travel, Hospitality & Leisure June 2013

2 Inspiring consumer confidence in challenging economic times Agenda Europe in a global context The crisis continues Prospects for the UK consumer economy Overcoming barriers to growth

3 Europe in a global context

4 Developing nations remain key drivers As developing nations remain key to global economic growth, prevailing Eurozone crisis continues to threaten Europe s role in the global economy. 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2.2% 1.6% US 0.3% 0.1% -0.2% -0.5% Europe (EU27) Global growth of Gross Domestic Product (%) 0.6% 0.8% 7.8% 7.5% 5.5% 5.3% 4.7% 5.0% Euro Area Japan China India Other developing Asia (Projected) 3.1% 3.0% Latin America 5.5% 2.2% Middle East 4.2% 3.7% 3.6% 2.9% Africa Russia, Central Asia, and Southeast Europe Source: The Conference Board Global Economic Outlook 2013

5 International corporates turn decisively expansionary International market exposure provides opportunities for growth Index of corporate expansion: International & UK-facing corporates Source: Economics & Markets Research, Deloitte LLP, London

6 Europe remains on the edge

7 Support for European unity on decline While support for Euro is still strong in major European countries, favourability for the European Union continues to decline, thus putting stress on political will to keep EU together. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% EU Favourability (% Favourable) France Greece Germany Spain Italy Support for Euro currency (% Keep the Euro) 52% 63% 69% 69% 71% 66% 66% 67% 60% 64% Germany United Kingdom Spain France Source: Pew Research Center (The New Sick Man of Europe: the European Union) 0% 20% 40% 60% 80%

8 Euro breakup fears easing, but risks remain Average probability of euro secession Probability assigned by UK CFOs to the likelihood of any of the existing members of the euro area not being in the single currency in the next 12 months (%) 37% 36% 26% 27% 22% 18% 2011 Q Q Q Q Q Q1 Source: Economics & Markets Research, Deloitte LLP, London

9 Eurosystem imbalances narrow but remain wide Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Net Balance with the Eurosystem/Target (EUR billions) Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Germany Greece Spain France Italy Source: Institute of Empirical Economic Research - Osnabrück University

10 Europe s unemployment woes continue Benefiting from its education and skill development policies, Germany continues to maintain a lower unemployment rate than its European peers. 30% Unemployment rate (%) 25% Spain 20% 15% 10% 5% France Italy United Kingdom Germany 0% Germany United Kingdom Spain France Italy Source: Eurostat

11 Europe remains a key destination for UK travellers Countries visited by UK residents in 2012 (as % of total overseas visits) Rest of the World 32.9% Spain 19.7% Belgium 2.9% Greece 3.2% France 15.5% USA 5.3% Source: ONS Netherlands 3.4% Portugal 3.4% Germany 4.1% Italy 4.7% Irish Republic 5.0%

12 Prospects for the UK consumer?

13 Prospects for the UK consumer? Three key issues 1 2 3

14 Impacts on consumer spending

15 Confidence and travel go hand in handg 0 UK Consumer Confidence v/s Day Visits expenditure by UK residents 6,500 0 UK Consumer Confidence v/s UK resident s outbound spending Consumer Confidence Barometer Index Day Visits expenditure by UK residents (GBP million) Source: ONS, GB Day Visits Survey 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2, Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Consumer Confidence Barometer Index UK residents' outbound spending (GBP million - seasonallyg

16 Consumers taking control of their debt 70,000 68,000 66,000 64,000 62,000 60,000 UK Credit card debt outstanding and % of outstanding balances bearing interest 80% 78% 76% 74% 72% 70% 80,000 70,000 60,000 50,000 40,000 UK Credit cards in issue v/s Active card accounts 58,000 56,000 54,000 52,000 50,000 Jan '08 Apr '08 Jul '08 Oct '08 Jan '09 Apr '09 Jul '09 Oct '09 Jan '10 Apr '10 Jul '10 Oct '10 Jan '11 Apr '11 Jul '11 Oct '11 Jan '12 Apr '12 Jul '12 Oct '12 Jan '13 68% 66% 64% 62% 60% 30,000 20,000 10,000 0 Credit outstanding (GBP million) Percentage of outstanding balances bearing interest (%) Source: BBA - Credit Card Statistics Number of cards in issue (thousands) Number of active accounts (thousands)

17 Private sector hiring, offsets job losses in public sector

18 Household spending predicted to improve, albeit slowly Growth forecast to remain below levels experienced during 1990s consumer boom 8% 6% 4% Household expenditure growth (%) Decade to the economic downturn average growth ~ 4% OBR forecastsan average growth 1.7% 2% 0% -2% Forecasts -4% Source: ONS and Office for Budget Responsibility (OBR)

19 Consumers will still not compromise on their holidays UK Consumer spending expectations for major purchases 25% UK consumers major purchases for the next three months 20% 20% 19% 15% 10% 8% 7% 9% 9% 5% 3% 3% 3% 3% 3% 2% 5% 5% 5% 5% 0% Selling an expensive electrical item Downsizing: moving into a smaller home Upgrading: moving into a larger home Buying a car Buying a major home appliance Buying an expensive electrical item Home improvements Long break holiday Q Q Source: Deloitte Consumer Tracker (Q1 2013)

20 Majority of corporates now focused on growth Improving situation allows business to switch out of survival mode

21 Business leadership seen as key for the new growth As consumers and government are unable to kick start the economy

22 In summary overcoming barriers to growth 1 Know your consumer 5 Target emerging consumers 2 Retain focus on your cost base 6 Invest for growth 3 Differentiate your product & services 7 Agile businesses thrive in a rapidly changing environment 4 Demonstrate value for money 8 5 forces of digital disruption Keep it SIMPLE however, in everything you do!

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