Fears over coronavirus could hit holiday and retail sectors

This could put on hold £17.2bn of holiday spending as consumers await greater clarity over the severity of the virus.

More than a fifth of concerned consumers have bought products to protect themselves from the virus. Around a third of these consumers are already avoiding contact with others and a quarter of them avoid public transport.

If the virus persists, Retail Economics expects to see a significant knock-on impact on the retail and leisure sector.

The research showed there is confusion over the current level of threat. Around a quarter (23 per cent) of consumers believe the coronavirus is a high threat to health in the UK, while around a third (35 per cent) think it is a moderate threat and two fifths (42 per cent) see it as a low threat.

Concerned consumers (those who believe the virus threat is high) are five times more likely to avoid travelling abroad in order to protect themselves from the coronavirus and are 20 times more likely to avoid shopping destinations such as malls.

There is further anxiety and confusion around how consumers can safeguard themselves from the virus. Retail Economics said a “staggering” 48 per cent of respondents will try to avoid buying online from international sellers that ship products directly from China if the virus persists.

The majority of shoppers (81 per cent) said they are not worried about product shortages as a result of the coronavirus.

Retail Economics said there could be a near three-fold increase in the number of consumers who avoid shopping destinations (6 per cent currently avoid shopping destinations to protect themselves from the virus and 16 per cent would consider it if the virus persists).

People who avoid restaurants and entertainment such as the cinema could almost double (from 9 per cent currently to 17 per cent if the virus persists in the future).

Retail Economics said this would see more shoppers gravitate online, shop in less busy locations and avoid public transport.

Over 40 per cent would consider avoiding busier locations in favour of quieter destinations in the future if the virus persists, while more than a third (35 per cent) would consider buying more products online to avoid physical destinations altogether. Researchers said this is likely to impact city and flagship destinations the most.

However, the biggest impact will be on holidays if the outbreak continues. Over 31 per cent would consider avoiding travelling abroad in the future. Given that UK households spend around £2,200 on holidays abroad per year, according to the ONS, this could put £17bn at risk of not being spent on travel overseas.

Retail Economics said consumers could shift this discretionary spending into other parts of the consumer sector or put more into savings.

Holidaying in the UK could be set to see a rise (staycations) while shoppers may decide to treat themselves in other ways which could trickle through to the retail sector.

Retail Economics’ chief executive Richard Lim said: “If the virus persists, consumers are likely to cut back in three main areas: holidays and travel, eating out, and using public transport.

“Consumers will shift this spending elsewhere as they substitute what they would have spent abroad to other areas of the economy.”

Diverting spending away from holidays is likely to affect the middle class and the most affluent households. The research showed the most affluent spend more than 13 times the amount on holidays abroad compared to the poorest in the UK. They also have a high propensity to spend in other discretionary areas.

Mr Lim said: “From a retail perspective, this could support some areas, but whether or not the additional cash will offset fears around spending time in public spaces and nervousness in going to shopping locations remains unclear.

“What’s more, a reduction in tourist numbers to the UK will hit luxury retailers, particularly in the capital and other tourist locations. However, people have said they would shift more spend online, so retailers that have a good online proposition could benefit.”

He said the coronavirus outbreak will add to an already fragile backdrop for consumer confidence.

“People are worried about Brexit, a weaker outlook for the economy, lack of savings, and how to shop sustainability amid concerns about the impact of consumption on the environment,” he said.