Holidays untouchable despite consumers' fears over income

The study by PwC suggests that some Britons could decide to spend less time at their favourite restaurant following the vote to leave the European Union.

However, PwC’s consumer sentiment survey also indicates that large numbers of Britons won’t hold back when it comes to splashing out on their summer holiday.

PwC asked more than 2,000 people in England, Scotland and Wales if they expected their household disposable income to increase or decline over the next 12 months. The survey, which was carried out immediately after the UK voted to leave the EU, found that expectations of future family spending prospects had fallen.

The results showed that a net 8 per cent of consumers expected to be worse off over the next 12 months. That was in contrast with the 5 per cent peak in net positive sentiment over the previous 12 months.

However, despite the expected downturn, consumer confidence still remains higher than at any point between 2008 and 2014, according to PwC. The company said that confidence is not expected to fall to previous post-­recession levels; 2015 recorded the highest levels of confidence in household finances since the survey began in 2008.

Kien Tan, a director at PwC, said: “While we do not expect consumer spending to grow as quickly as anticipated prior to the EU referendum, we do expect consumer spending to remain resilient, and there is currently no evidence to suggest that a protracted decline in overall consumer spending is on the cards.

“What will change is where disposable income will be spent. When we asked consumers how the EU referendum result would impact family spending, the majority expected to spend more on groceries and holidays.

“That’s good news for supermarkets planning to pass through inflationary cost increases, as it suggests that consumers already anticipate price rises to affect their weekly shopping.

“Meanwhile, holidays continue to be a key non-­negotiable for many, in spite of additional costs caused by sterling’s devaluation.”

PwC predicts that spending priorities will change. Eating out and entertainment outside the home are likely to be the losers as consumers divert available spending to food, holidays and savings and investments

PwC found that consumers in London were the most confident about their disposable income growing over the next 12 months. In London, 10 per cent of respondents expected to be much better off than last year.

In Yorkshire and the Humber, just five per cent of respondents expected to be much better off than last year. Overall, the Yorkshire balance of opinion was -14 per cent, which made it the joint second gloomiest region, along with the South West. Scotland was the most pessimistic place, with a balance of -17 per cent.

The survey reflects the findings of last week’s PwC UK Economic Review, which concluded that the UK is unlikely to face recession as a result of the recent EU referendum.

PwC forecasts that consumer spending growth is likely to hold up better than business investment, but could still slow from previous strong rates. This reflects the impact of a weaker pound in pushing up import prices and squeezing the real spending power of households, as well as lower consumer confidence levels and slower jobs growth.

Lisa Hooker, a partner at PwC, said: “It’s clear from this that consumers do not expect anything like a repeat of the 2009 recession. While the early prognosis for consumer spending appears robust, it will be critical for retailers and leisure operators to keep watching consumer sentiment over the next few months for any signs of a change in heart, and be ready to respond with their strategies accordingly.”