Inspiring consumer confidence in challenging economic times Graham Pickett Lead Partner Travel, Hospitality & Leisure June 2013
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
Europe in a global context
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 2012 2013(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
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
Europe remains on the edge
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) 2007 2009 2010 2011 2012 2013 France Greece Germany Spain Italy Support for Euro currency (% Keep the Euro) 52% 63% 69% 69% 71% 66% 66% 67% 60% 64% 2013 2012 Germany United Kingdom Spain France Source: Pew Research Center (The New Sick Man of Europe: the European Union) 0% 20% 40% 60% 80%
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 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 Source: Economics & Markets Research, Deloitte LLP, London
Eurosystem imbalances narrow but remain wide 1000 800 600 400 200 0-200 -400-600 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
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% 2007 2008 2009 2010 2011 2012 2013 Germany United Kingdom Spain France Italy Source: Eurostat
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%
Prospects for the UK consumer?
Prospects for the UK consumer? Three key issues 1 2 3
Impacts on consumer spending
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 3000-5 -10-15 -20-25 -30-35 -40 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 2,000-5 -10-15 -20-25 -30-35 -40-45 -50 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 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000
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)
Private sector hiring, offsets job losses in public sector
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 1998-2007 average growth ~ 4% OBR forecastsan average growth 1.7% 2% 0% -2% Forecasts -4% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: ONS and Office for Budget Responsibility (OBR)
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 Q1 2012 Q1 2013 Source: Deloitte Consumer Tracker (Q1 2013)
Majority of corporates now focused on growth Improving situation allows business to switch out of survival mode
Business leadership seen as key for the new growth As consumers and government are unable to kick start the economy
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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