market outlook Strong demand amid slow economic growth forecast


level in two years. CFOs are responding to the rise in national insurance contributions [from April] with a sharper focus on cost reduction. They’re also considering productivity-raising measures and, to a lesser extent, passing on higher costs to consumers. “Looking at the broader strategy stance,


corporates are still quite defensive. Cost reduction remains the top priority for CFOs, increasing cashflow the second. On balance, CFOs expect UK corporates to cut capital expenditure, hiring and discretionary spending over the next 12 months, with hiring expectations seeing the sharpest fall since the pandemic.” He noted: “This is consistent with a


tight-ish labour market underpinning our 1% growth forecast. It’s reflected in CFOs’ expectations for average wage growth of 3.2% this year, which remains high by historical standards. On this estimate, wages should outpace inflation which we expect to average 2.5%.” Economic growth of 1% this year would


be half the government’s stated target, of course, with De saying: “It would almost certainly fall short of the government target of making the UK the fastest- growing G7 economy. In fact, it would be slower than the UK’s long-term trend growth rate of 1.5%.” Yet he argued: “Given the underlying momentum from last year and the external headwinds, this seems a benign outcome. The UK would still likely outperform its three largest European peers this year.” De noted: “The March forecasts by the Office for Budget Responsibility (OBR)


FIGURE 8: UK CONSUMER CONFIDENCE


-100 -80 -60 -40 -20 0


-9 -16 -28


-18 -27


% point difference between ‘confident’/‘not confident’ -11 -9 -10 -11


-17 -16 -17 -16 -18 -17


-10 -12 -21 -26 -38 -45 -53 -61 -71 -82 -88 Q4 2019


Q1 Q2 Q3 2020


Q4 Q1 2021


Q2


Confidence overall In disposable income In UK economy


Q3 Q4 Q1 2022


Q2 Q3 Q4 Q1 Q2 Q3 2023


Q4 Q1 2024


Q2 Q3 Q4 -67 -73 -73 -83 -80 -76 -49 -55 -54


-47 -45 -56


-40 -35 -58 -17 -19 -20 -20 -18 -16 -14 -11 -11 -10 -8 -8


-28 -23 -23 -22 -26 -32


-38 -44 -46 -52


Figures rounded Source: Deloitte Consumer Tracker


OVERALL consumer confidence appeared higher than might be expected at the end of 2024


(Figure 8). But a majority of UK adults say they cut spending in 2024 and only a minority


expect their personal finances to improve in 2025 (Figure 9). Demand for overseas holidays in 2025 appears stronger than


last year (Figure 10). More than half of holidaymakers expect to spend more on holiday this year (Figure 11), but holiday prices are a concern (Figures 12 & 13)


Spending in last 12 months 100 %


20 40 60 80


0 66% 58% 38% 27% 63% 56% 43% 32% 49% 50% % 100


FIGURE 9: UK COST OF LIVING Price rises v income 85%


82%


20 40 60 80


All UK adults 18-24 Cut spending 25-49 50-64 65+ Maintained spending 0 72% % 10% 1% 9%5% All UK adults 18-24 Prices rising faster 9% 1% 25-49 10% 1% 50-64 Income rising faster *‘Don’t knows’ excluded so figures do not add up to 100% **’At least a little’ Source: YouGov, Nov 27-28, 2024 Base: 2,260 UK adults 65+ Income keeping pace 14% 1% 83% 81%


should provide a useful update on public finances and UK growth prospects. I would expect the OBR to cut its growth forecast for this year which has looked increasingly optimistic since the Budget. Gilt yields have moderated from their January highs but remain above October levels. That implies higher [government] borrowing costs and, given weaker growth prospects, a potentially material reduction in the narrow fiscal headroom the chancellor left herself after the Budget. Given the government’s commitment to not raise taxes further, that would likely constrain its spending plans. “I should point out the UK is not alone


LQ H[SHULHQFLQJ KLJKHU ERUURZLQJbFRVWV 0DQ\ :HVWHUQ FRXQWULHV KDYH VHHQbWKHLU


Personal finances in next 12 months 100


20 40 60 80


0 60%


11% 38%43% 38%


18% 42% 24% 16% 8% All UK adults 18-24 25-49 50-64 3% 65+ Should improve** Remain same Grow worse 48% 35% 38% 31%


10 Travel Weekly Insight Report 2025


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