A year in phases: The return to normality

The public mood is currently as good as it has been since the pandemic began. Trajectory’s Optimism Index – a monthly barometer of consumer sentiment – finds that national optimism climbed rapidly throughout the spring and is now staying high as we head into summer. Consumer confidence is also positive and spending expectations have recovered from their incredibly poor position at the start of the year. Good news all round.

The vaccines are helping to reassure people that the pandemic is ending – even despite the Delta variant delaying full reopening in England until 19^th July – and although consumers are still navigating restrictions in daily life, they are doing so with a smile on their face, happy to be able to do at least some things now the most severe measures have been removed.

Reticence and caution beneath headline confidence
Despite this headline positivity, there are some more concerning signs of worry and caution in the data. Even before the Delta variant, the public were not relaxing at the same rate that society was reopening. The proportion of people worried about returning to public spaces, like shops, restaurants or pubs has declined by only 10% since March and still accounts for more than 40% of the population.

The proportion of people who are more concerned by the health impacts of the pandemic than the economic ones has moved even less – declining from a peak of 73% in January to 66% in June.

In short, although we are leaving our homes more – and are glad to be doing so – we are re-engaging with society in a very cautious way. Worry about resuming normal life is at such a high level that this rate of relaxation will continue to lag behind the unlocking.

To put it another way, a large number of consumers will remain reluctant to do things long after they are allowed to do them. This should be a real concern, given that the government has bet the house on consumer demand stimulating the recovery.

Covid-19 is not going to eliminated by widespread vaccination; it will continue to be a public health threat even after it ceases to be a public health emergency. The point of this is that while the public mood is currently quite good it is not built on firm foundations, and new measures in the autumn could spark even greater concern among consumers who are only just starting to relax from a traumatic year.

Emerging economic challenges
Covid-19 is not the only show in town. Consumers will encounter new financial pressures in the autumn as we move from the acute health phase of this crisis to the economic phase. There are two big milestones to watch out for.

The first comes at the end of September when the temporary uplift to Universal Credit and Working Tax Credits is removed. The second comes a couple of weeks later, when the Coronavirus Job Retention Scheme – or the furlough scheme – closes. These changes will affect millions of households and accentuate economic concerns.

Between lingering health anxiety and emerging economic concern, we foresee four potential scenarios for consumer confidence at the end of 2021.

1. Regression: Health concerns continue to outweigh financial ones and people become even more worried about returning to public spaces. Likely the result of a new variant, which essentially puts us back to where we were at the start of this year
2. Stagnation: The public mood stays roughly where it is now, with health concerns outweighing economic ones and the public only slightly more confident about returning to public places – especially indoors. Likely to check progress of recovery and eventually impact consumer confidence
3. Progression: Health concerns recede and the public get more confident about returning to normality. Economic impacts start to be felt but with health anxiety removed they are the only thing affecting consumer demand
4. Perfect storm: Economic concerns loom large before the public have recovered from Covid-19 health concerns. Very low demand and consumer spending expectations plummet.

Based on our current, slow, progress towards greater confidence in public places, this final scenario remains a distinct possibility, and could occur without any unwelcome new Covid-19 variants that change the game.

The reasons why the public aren’t yet fully confident about reopening are understandable: we’re living through a pandemic that has killed more than 120,000 people in the UK, and even when fully vaccinated reacclimatising to normality will take time and naturally be impeded by caution. But events are set to overtake this this slow attitudinal progress – and will necessitate a change of pace from government, and new expectations from business.

Tom Johnson is managing director of Trajectory Partnership