The Deloitte Consumer Tracker Q2 2017

1. The Deloitte Consumer Tracker Signs of distress Key indicators Q2 2017

2. 2 Confidence suffers a significant 3 percentage point drop quarterly. Consumer confidence is down for the third quarter in a row, back to levels seen nearly three years ago (Q4 2013) and is two points lower than a year ago. -20% -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Overall consumer confidence Q2 2017 Deloitte Consumer Tracker

3. 3 Individual measures of confidence Five out of six measures of confidence fall significantly on a quarterly basis. Consumer confidence in disposable income in particular falls by a major 7 points to its lowest level since Q4 2013. -20% -10% 0% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Your job security -20% -10% 0% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Your level of debt -20% -10% 0% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Your general health and wellbeing -10% 0% 10% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Your children’s education and welfare -50% -40% -30% -20% -10% 0% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Your household disposable income -20% -10% 0% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Your job opportunities/career progression Q2 2017 Deloitte Consumer Tracker

4. 4 Individual measures of confidence (y-o-y) Year-on-year confidence the picture is more mixed, with only 3 out of 6 measures falling. Sentiment about job opportunities and career progression, and views on job security are both higher than they were a year ago, and this despite a quarterly fall. -11% -15% -13% -2% -36% -12% -7% -8% -8% 0% -29% -10% -4% -5% -5% 2% -18% -3% -4% -4% -12% 1% -15% -5% -10% -1% -11% -4% -14% -7% -6% -6% -13% -4% -24% -6% -40% -30% -20% -10% 0% 10% Your job security Your level of debt Your general health and wellbeing Your children’s education and welfare Your household disposable income Your job opportunities/career progression Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Measures of confidence Q2 2017 Deloitte Consumer Tracker

5. 5 Spending behaviours in the last three months (y-o-y) While spending is up significantly in the essential categories driven by rising inflation, consumers have reduced their spending in all the discretionary categories compared to the same period a year ago. -30% -20% -10% 0% 10% 20% 30% 40% Goingout(e.g.cinema, theatre,concerts,etc.)' Furnitureandhomeware Electricalequipment(e.g. PCs/laptop,television,mobile phonedevice,etc.)' Clothingandfootwear Alcoholicbeveragesand tobacco Restaurantsandhotels (eatingoutandshortbreak) Majorhouseholdappliances (e.g.washingmachine,fridge, cooker,vacuumcleaner,etc.)' Holidays(longbreak) Landline/mobilephone, Internetandcable/TV subscriptions' Housing(e.g.rent,mortgage, maintenance)' Transport Utilitybills(e.g.water, electricity,gasandother fuels)' Groceryshoppingforfoodand non-alcoholicbeverages Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Year on year spending behaviours Q2 2017 Deloitte Consumer Tracker

6. 6 12% 13% 15% 10% 12% 15% 15% 10% 11% 15% 12% 9% 7% 9% 5% 5% 3% 5% 5% 5% 5% 12% 12% 8% -16% -15% -16% -12% -11% -7% -12% -11% -10% -5% -8% -6% -5% -2% -8% -5% -6% 0% -7% -3% -2% 0% -4% -7% Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Essentials Discretionary Spending in the last three months Spending on essentials and discretionary categories are both down this quarter – a sign of the pressures consumer spending is coming under. Quarterly spending on Essentials and Discretionary items Q2 2017 Deloitte Consumer Tracker

7. 7 Expansionary vs Defensive behaviours Expansionary behaviours are down for the second consecutive quarter and back to levels last seen two and a half year’s ago (Q3 2014) 21% 22% 23% 24% 25% 26% 27% 28% Defensive Expansionary Quarterly Expansionary vs Defensive spending behaviours Q2 2017 Deloitte Consumer Tracker

8. 8 Expansionary behaviours 37% 31% 32% 34% 38% 34% 36% 41% 47% 41% 43% 46% 53% 50% 49% 49% 55% 50% 50% 48% 50% 45% 43% 20% 17% 17% 18% 21% 17% 15% 14% 17% 16% 17% 14% 18% 18% 17% 19% 18% 18% 19% 16% 20% 19% 13% 8% 6% 9% 9% 9% 9% 10% 8% 10% 8% 10% 9% 11% 11% 11% 13% 12% 13% 13% 11% 12% 11% 11% 16% 18% 15% 17% 17% 20% 15% 19% 20% 23% 21% 22% 21% 24% 23% 22% 22% 23% 23% 24% 23% 25% 20% 30% 33% 32% 30% 30% 33% 29% 28% 24% 28% 25% 22% 15% 17% 21% 17% 13% 16% 17% 18% 18% 26% 26% Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Buying more items Spending more (due to sale/special offer) More impulse buying Trading up More expensive Quarterly Expansionary behaviours Q2 2017 Deloitte Consumer Tracker

9. 9 Defensive behaviours 32% 22% 22% 23% 24% 23% 22% 17% 20% 18% 18% 17% 16% 20% 14% 17% 14% 16% 17% 16% 16% 17% 17% 29% 25% 25% 25% 21% 24% 24% 21% 22% 23% 19% 20% 19% 21% 20% 18% 18% 20% 21% 19% 20% 22% 19% 36% 33% 34% 34% 31% 32% 32% 38% 38% 39% 37% 39% 39% 38% 37% 36% 36% 37% 40% 38% 40% 40% 37% 12% 9% 11% 9% 10% 10% 8% 9% 8% 9% 8% 9% 8% 8% 8% 8% 9% 7% 7% 8% 8% 8% 7% 21% 19% 20% 17% 19% 20% 17% 17% 21% 19% 18% 16% 17% 16% 16% 14% 16% 13% 15% 16% 15% 15% 16% 21% 19% 18% 18% 20% 20% 17% 18% 20% 19% 17% 17% 15% 17% 17% 17% 15% 15% 14% 15% 16% 15% 16% Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 More planning Controlling impulse buying Buying less items Spending less (due to sale/special offer) Bargain hunting Trading down Quarterly Defensive behaviours Q2 2017 Deloitte Consumer Tracker

10. 10 Spending on discretionary goods categories in the last 3 months Despite a slight respite in clothing this quarter compared to Q1 2017, other discretionary categories have experienced a drop in spending. -18% -21% -23% -13% -13% -7% -17% -12% -3% -13% -6% -4% 1% -12% -6% -7% 0% -11% -2% -3% 3% -9% -8% -19% -18% -17% -16% -14% -11% -14% -14% -12% -10% -11% -6% -7% -10% -9% -9% -6% -8% -8% -5% -5% -7% -11% -12% -11% -12% -9% -10% -7% -9% -9% -5% -5% -5% -5% -3% -5% -6% -3% -1% -4% -1% -4% -2% -3% -5% -13% -9% -15% -10% -11% -4% -12% -10% -2% -7% -7% -5% 0% -8% -7% -8% 2% -6% -4% -3% 1% -4% -10% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Clothing and footwear Furniture and homeware Major household appliances (e.g. washing machine, fridge, cooker, vacuum cleaner, etc.)' Electrical equipment (e.g. PCs/laptop, television, mobile phone device, etc.)' Net Spending on discretionary goods over the last 3 months Total Q2 2017 Deloitte Consumer Tracker

11. 11 Spending on discretionary leisure categories in the last 3 months Spending on experiences such as eating out and cinema trips continued to fall but spending on holidays rose a sign that consumers will not compromise on going away. -31% -26% -26% -23% -24% -17% -24% -20% -15% -18% -15% -16% -9% -15% -14% -13% -4% -13% -10% -10% -5% -11% -15% -25% -24% -20% -17% -15% -11% -17% -13% -9% -12% -8% -3% -1% -10% -5% -2% -1% -6% -2% 1% 2% -6% -7% -15% -14% -11% -6% -5% -9% -8% -4% -8% -4% -1% 4% -4% -3% 0% 2% -4% -2% 5% 5% -1% 1% 4% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Going out (e.g. cinema, theatre, concerts, etc.)' Restaurants and hotels (eating out and short break) Holidays (long break) Net Spending on discretionary leisure categories over the last 3 months Total Q2 2017 Deloitte Consumer Tracker

12. 12 Spending on essential categories in the last 3 months Spending on transport and utilities is down this quarter compared to the previous quarter but remains higher than it was a year ago. Spending on groceries rose this quarter. 21% 19% 23% 18% 23% 32% 26% 22% 30% 21% 21% 15% 25% 6% 8% 4% 20% 8% 12% 8% 30% 19% 22% 40% 40% 43% 27% 28% 44% 49% 31% 44% 33% 19% 14% 22% 17% 8% 5% 12% 12% 4% 4% 20% 31% 16% 21% 23% 29% 15% 20% 19% 20% 15% 15% 13% 12% 10% -1% 2% 5% 4% 0% 1% 7% 9% 12% 13% 8% Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 Q32016 Q42016 Q12017 Q22017 Grocery shopping for food and non-alcoholic beverages Utility bills (e.g. water, electricity, gas and other fuels)' Transport Net Spending on essential categories over the last 3 months Total Q2 2017 Deloitte Consumer Tracker

13. 13 Category spending in the last 3 months Both retail and leisure spending suffered a drop in spending for the second consecutive quarter. -9.5% -9.2% -9.7% -7.3% -6.5% 0.3% -6.5% -8.0% -5.8% 1.2% -4.3% -2.5% -2.7% 4.2% -6.8% -5.0% -6.0% 4.0% -6.0% -1.7% -2.3% 5.2% -2.2% -3.2% -23.7% -21.3% -19.0% -15.3% -14.7% -12.3% -16.3% -13.0% -12.3% -10.7% -11.3% -8.0% -5.0% -4.7% -9.3% -9.5% -4.3% -3.0% -7.0% -2.3% -1.3% -1.3% -5.3% -6.0% Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Retail spending Leisure spending Quarterly category spending in the last three months Q2 2017 Deloitte Consumer Tracker

14. 14 Spending in the last three months The May retail sales volume decline was worse than expected and hit their slowest level in four years. The fall in volume meant that retail sales in value terms saw its weakest rise since April 2013. -6 -4 -2 0 2 4 6 8 10 May2007 Aug2007 Nov2007 Feb2008 May2008 Aug2008 Nov2008 Feb2009 May2009 Aug2009 Nov2009 Feb2010 May2010 Aug2010 Nov2010 Feb2011 May2011 Aug2011 Nov2011 Feb2012 May2012 Aug2012 Nov2012 Feb2013 May2013 Aug2013 Nov2013 Feb2014 May2014 Aug2014 Nov2014 Feb2015 May2015 Aug2015 Nov2015 Feb2016 May2016 Aug2016 Nov2016 Feb2017 May2017 Volume Value Q2 2017 Deloitte Consumer Tracker Retail Sales TOTAL Volume and Value (excl. fuel) SA - annual % change Source: Thomson Reuters / Office of National Statistics (ONS)

15. 15 Inflation UK inflation rose to 2.9% in June, the highest since June 2013. We are starting to see this impacting average in-store prices, which increased by 2.8%, the largest growth since March 2012, and non-food saw the biggest price rise since October 2011. This suggests that retailers are having to pass some of the cost pressure from the rising price of imported goods on to consumers. -1 0 1 2 3 4 5 6 01/05/2007 01/07/2007 01/09/2007 01/11/2007 01/01/2008 01/03/2008 01/05/2008 01/07/2008 01/09/2008 01/11/2008 01/01/2009 01/03/2009 01/05/2009 01/07/2009 01/09/2009 01/11/2009 01/01/2010 01/03/2010 01/05/2010 01/07/2010 01/09/2010 01/11/2010 01/01/2011 01/03/2011 01/05/2011 01/07/2011 01/09/2011 01/11/2011 01/01/2012 01/03/2012 01/05/2012 01/07/2012 01/09/2012 01/11/2012 01/01/2013 01/03/2013 01/05/2013 01/07/2013 01/09/2013 01/11/2013 01/01/2014 01/03/2014 01/05/2014 01/07/2014 01/09/2014 01/11/2014 01/01/2015 01/03/2015 01/05/2015 01/07/2015 01/09/2015 01/11/2015 01/01/2016 01/03/2016 01/05/2016 01/07/2016 01/09/2016 01/11/2016 01/01/2017 01/03/2017 01/05/2017 CPI Harmonised Inflation UK CPI ANNUAL PERCENTAGE CHANGE - ALL ITEMS NADJ Source: Thomson Reuters / Office of National Statistics (ONS) Q2 2017 Deloitte Consumer Tracker

16. 16 Average earnings v. Inflation In addition, real wage growth is now in negative territory, which has started to dampen consumer confidence. % Growth in average wages vs. CPI Inflation Source: Thomson Reuters / Office of National Statistics (ONS) Q2 2017 Deloitte Consumer Tracker

17. 17 Unemployment The unemployment rate at 4.6% is the lowest since 1975. Source: Thomson Reuters / Office of National Statistics (ONS) UK LFS: Unemployment rate, all, aged 16 & over seasonally adjusted Q2 2017 Deloitte Consumer Tracker

18. 18 Savings ratio Yet strong consumer spending has been at the cost of savings Source: Thomson Reuters / Office of National Statistics (ONS) Savings ratios Q2 2017 Deloitte Consumer Tracker

19. 19 Household lending After years of people paying off debts post-downturn, unsecured borrowing has steadily increased since 2014 reaching record highs. Source: Thomson Reuters / Office of National Statistics (ONS) Secured and Unsecured lending to household Q2 2017 Deloitte Consumer Tracker

20. 20 Consumer spending – Next three months As consumers claim they will continue to reduce their spending into the next quarter, this is shaping up to be a difficult second half of the year for retailers and the consumer economy as a whole. 8% 3% 9% 1% 7% 7% 7% 3% 6% 6% 6% 4% 5% 0% 1% 1% 2% -1% 0% 2% 3% 5% 7% 3% -19% -19% -14% -16% -13% -19% -14% -14% -12% -17% -8% -8% -9% -16% -9% -9% -9% -14% -8% -7% -7% -13% -4% -8% -20% -17% -14% -15% -15% -16% -14% -13% -14% -12% -8% -8% -10% -9% -6% -7% -10% -7% -8% -6% -8% -8% -5% -7% Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Essentials Small-ticket items Big-ticket items Consumer spending over the next three months Q2 2017 Deloitte Consumer Tracker

21. About this research The Deloitte Consumer Tracker is based on a consumer survey carried out by independent market research agency, YouGov, on our behalf. This survey was conducted online with a nationally representative sample of over 3,000 UK adults aged 18+ between 16 June and 18 June 2017. For more information on the methodology, please visit www.deloitte.co.uk/consumertracker. This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London, EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NWE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms. © 2017 Deloitte LLP. All rights reserved.

The Deloitte Consumer Tracker Q2 2017

Deloitte UK

The Deloitte Consumer Tracker Q2 2017