The Deloitte Consumer Tracker Q3 2017

1. The Deloitte Consumer Tracker Q3 2017 Charts and analysis October 2017

2. 2 The Deloitte Consumer Tracker Q3 2017 Key indicators

3. 3 Consumer confidence recovered 3 percentage points over the last quarter Consumer confidence is up compared to the previous quarter for the first time in a year. However, it is down by 2 percentage points compared to Q3 of last year. -18% -15% -14% -15% -13% -15% -12% -10% -8% -11% -7% -6% -5% -8% -5% -7% -5% -7% -8% -8% -5% -6% -7% -10% -7% -20% -18% -16% -14% -12% -10% -8% -6% -4% -2% 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 Q32017 -2% +3% Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker Overall consumer confidence

4. 4 The growth in consumer confidence is driven by various factors Five out of six measures of confidence have seen growth in the last quarter, with people particularly optimistic about their children’s education and welfare, as well as job security and their own job opportunities and career progression. -16% -14% -12% -10% -8% -6% -4% -2% 0% Your job security -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% Your level of debt -20% -15% -10% -5% 0% Your general health and wellbeing -8% -6% -4% -2% 0% 2% 4% Your children’s education and welfare -50% -40% -30% -20% -10% 0% Your household disposable income -20% -15% -10% -5% 0% Your job opportunities/career progression Source: Deloitte Consumer Tracker Q3 2017

5. 5 Confidence has improved across all age groups 18-34 year olds remain the most confident, but 35-54 year olds have seen the biggest quarter on quarter growth in confidence. -30% -25% -20% -15% -10% -5% 0% 5% 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 Q3 2017 18-34 35-54 55+ +4% Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker Deloitte consumer confidence age group

6. 6 Levels of consumer confidence vary across income bands Despite reporting positive confidence (+4%), high earners have actually seen a decline in their confidence compered to the previous quarter. Whilst those earning under £10k have seen significant growth quarter on quarter (+16% points). -40% -30% -20% -10% 0% 10% 20% 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 Q3 2017 Deloitte consumer confidence income group Under £10k £10k to £25k £25k to £50k £50k to £100k Above £100k +16% Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker

7. 7 There is increased confidence amongst the UK’s lower socio-economic groups Although still displaying lower confidence than the AB & C1 groups, lower socio economic groups DE & C2 both saw significant increases in their confidence. -30% -25% -20% -15% -10% -5% 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 Q3 2017 Deloitte consumer confidence social grade AB C1 C2 DE +7% Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker

8. 8 The year-on-year confidence picture is more mixed Compared to Q3 2016, 4 out of 6 measures have fallen, 1 has improved and 1 has remained the same. The fall in confidence in disposable income is the most significant decline reported (-9 points). -15% -16% -13% -6% -43% -16% -10% -10% -12% -1% -33% -10% -5% -8% -7% 2% -25% -6% -4% -3% -9% 3% -18% 0% -3% -1% -11% 2% -13% -1% -4% -3% -10% 3% -12% -3%-4% -7% -12% 1% -21% -1% -50% -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 Net confidence total Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker

9. 9 Unemployment continues to fall with a 40 year low of 4.3% reported in both June and July 2017 However, this is not having the expected positive impact on wages. 0 1 2 3 4 5 6 7 8 9 Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker UK LFS: Unemployment rate, all, aged 16 & over seasonally adjusted

10. 10 Consumers are feeling a squeeze as average earnings growth runs lower than inflation The gap between growth in earnings and inflation continues, meaning that consumers are beginning to experience a squeeze on their spending power. -3 -2 -1 0 1 2 3 4 5 6 % Growth in average wages vs. CPI Inflation Average earnings including bonuses Uk Inflation (CPI) Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker

11. 11 There is some optimism about the recovery of the Savings ratio from a low in Q1 However, taking a longer term view, we can see that the ratio is still much lower than previous years. 0 2 4 6 8 10 12 14 Saving ratios Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker

12. 12 On top of a real-wage squeeze and low levels of saving, consumers are also having to deal with growing debts Although growth in unsecured household lending has tailed off in 2017, it remains higher than at any time pre 2016. -4 -2 0 2 4 6 8 10 12 Aug2007 Oct2007 Dec2007 Feb2008 Apr2008 Jun2008 Aug2008 Oct2008 Dec2008 Feb2009 Apr2009 Jun2009 Aug2009 Oct2009 Dec2009 Feb2010 Apr2010 Jun2010 Aug2010 Oct2010 Dec2010 Feb2011 Apr2011 Jun2011 Aug2011 Oct2011 Dec2011 Feb2012 Apr2012 Jun2012 Aug2012 Oct2012 Dec2012 Feb2013 Apr2013 Jun2013 Aug2013 Oct2013 Dec2013 Feb2014 Apr2014 Jun2014 Aug2014 Oct2014 Dec2014 Feb2015 Apr2015 Jun2015 Aug2015 Oct2015 Dec2015 Feb2016 Apr2016 Jun2016 Aug2016 Oct2016 Dec2016 Feb2017 Apr2017 Jun2017 Aug2017 Secured and Unsecured lending to household UK CONSUMER CREDIT-NET UNSECURED LENDING TO INDIVIDUALS(%YOY) UK PERSONAL BORROWING: DWELLINGS - NET LENDING (%YOY) SADJ Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker

13. 13 -30% -25% -20% -15% -10% -5% 0% 5% 10% Net confidence your level of debt social grade AB C1 C2 DE -25% -20% -15% -10% -5% 0% 5% Net confidence your level of debt household profile No children Children -25% -20% -15% -10% -5% 0% 5% Net confidence your level of debt home ownership Non-Home Owners Home Owners -50% -40% -30% -20% -10% 0% 10% 20% 30% Net confidence your level of debt income group Under £10k £10k to £25k £25k to £50k £50k to £100k Above £100k -30% -25% -20% -15% -10% -5% 0% 5% Net confidence your level of debt age group 18-34 35-54 55+ -25% -20% -15% -10% -5% 0% 5% Net confidence your level of debt London vs rest North Midlands and South West London and South East London As a result, consumers are showing decreasing levels of confidence in their levels of debt Despite their overall improvement in confidence, young people are increasingly concerned over their levels of debt. Source: Deloitte Consumer Tracker Q3 2017

14. 14 Economic factors mean that consumers are displaying more defensive shopping behaviours Expansionary behaviours are down for the third consecutive quarter and back to levels last seen two and a half years ago (Q1 2014). 21% 22% 23% 24% 25% 26% 27% 28% 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 Q3 2017 Defensive Expansionary Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker

15. 15 And consumers are expecting to feel a squeeze on their spending Consumers expect to spend more on essentials and less on big-ticket items in the next three months. -25% -20% -15% -10% -5% 0% 5% 10% 15% 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 Q3 2017 Essentials Small-ticket items Big-ticket items Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker Next three months

16. 16 This trend towards greater spend on essentials is even more pronounced when looking at a year-on-year view Consumers expect to spend more on essentials (Groceries, Utility Bills, Housing) in the next 3 months and less on discretionary items compared to Q3 2016. 16% -12% -17% 4% 29% -16% -16% 11% -3% -15% -18% -18% -1% -13% 12% -12% -15% 5% 30% -14% -14% 5% -2% -15% -15% -15% -2% -13% 7% -9% -12% 5% 20% -11% -12% 3% -1% -12% -14% -11% 0% -8% 3% -10% -11% 3% 14% -10% -12% -1% -1% -13% -11% -8% -2% -7% 5% -8% -6% 3% 13% -8% -10% 3% -2% -10% -9% -8% 0% -4% 12% -10% -11% 5% 25% -10% -9% 7% 1% -10% -13% -12% 1% -5% -30% -20% -10% 0% 10% 20% 30% 40% Grocery shopping for food and non- alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear Housing (e.g. rent, mortgage, maintenance)' Utility bills (e.g. water, electricity, gas and other fuels)' Furniture and homeware Major household appliances (e.g. washing machine, fridge, cooker, vacuum cleaner, etc.)' Transport Landline/mobile phone, Internet and cable/TV subscriptions' Electrical equipment (e.g. PCs/laptop, television, mobile phone device, etc.)' Going out (e.g. cinema, theatre, concerts, etc.)' Restaurants and hotels (eating out and short break) Pensions and insurance Holidays (long break) Net spending next 3 months total Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker

17. 17 As well as reigning in their spending, consumers are concerned about the overall prospects for the economy over the next 12 months Despite a recovery in consumer confidence, consumers are cautious about prospects for the year ahead. -60 -50 -40 -30 -20 -10 0 10 20 01/08/2007 01/11/2007 01/02/2008 01/05/2008 01/08/2008 01/11/2008 01/02/2009 01/05/2009 01/08/2009 01/11/2009 01/02/2010 01/05/2010 01/08/2010 01/11/2010 01/02/2011 01/05/2011 01/08/2011 01/11/2011 01/02/2012 01/05/2012 01/08/2012 01/11/2012 01/02/2013 01/05/2013 01/08/2013 01/11/2013 01/02/2014 01/05/2014 01/08/2014 01/11/2014 01/02/2015 01/05/2015 01/08/2015 01/11/2015 01/02/2016 01/05/2016 01/08/2016 01/11/2016 01/02/2017 01/05/2017 01/08/2017 UK CONS. SVY. - GFK GENERAL ECO SITUATION OVER NEXT 12 MOS. NADJ Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker

18. 18 Summary The calm before the storm? Consumer confidence is up compared to Q2 2017, but there is reason to be cautious about the next three months and beyond. • Consumer confidence has grown compared to the previous quarter o However, confidence is still negative and is down year-on-year • The economy is struggling to improve post EU referendum o Unemployment is at an all-time low, but this is not stimulating wage growth o Inflation is well above the BoE’s target • Consumers and lenders are rightly concerned about debt o Unsecured borrowing has grown steadily since 2013 o The ability of consumers to pay off these debts is in question o There is a real possibility of interest rate rises in the near future • Concern over debt is starting to have an impact on consumer spending o Consumers expect to make less discretionary purchases in the next three months o The gap between expansionary and defensive shopping behaviour is narrowing Given the concerns about debt and disposable income, it is not clear whether the growth in consumer confidence represents the start of an upward trend, or rather an anomaly in a long-term downward trend. Q3 2017 Deloitte Consumer Tracker

19. 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 15 and 16 September 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 Q3 2017

Deloitte UK

The Deloitte Consumer Tracker Q3 2017