The UK consumer remains comparatively positive, at least in terms of the recent sustained period of significant negativity. We expect that this state will be maintained during 2015, due to a combination of improving labour markets and a recovery in real household incomes.

While average earnings growth remains relatively muted, the sharp slowing in the rate of inflation means that real earnings growth is now positive for the first time since the domestic recession began.

"The very real possibility of a no clear outcome in the election would have a dragging effect on consumer behaviour"

While there has been much debate over the last few weeks about the prospects for deflation in the UK, the fact that the slowing rate of inflation is being driven by petrol, energy and food prices limits the prospects of deferred spending in anticipation of further price falls. Indeed, there are some reasonably solid arguments that the cut in fuel prices might be viewed by consumers in the same vein as a tax cut, something which generally results in a rise in spending.

With a general election looming there will be a lot of debate about the impact of political uncertainty on the consumer behaviour. We believe that so long as a government is formed on May 8th, then the impact on consumer confidence will be limited. However, the very real possibility of a no clear outcome in the election would have a dragging effect on consumer behaviour.

As far as the leisure sector goes it could be argued that an election year might be good for leisure spend as consumers lose interest in electioneering and go out of home to get away from blanket television coverage.

Graph 1 (below) shows UK cinema admissions over the period covering the last six general elections, and this shows that admissions rose in four out of six election years. Clearly, a lot of this depends on the quality of product that is coming out of Hollywood in any particular year, but the argument outlined above does seem credible in the light of this data, particularly since overall spending on leisure services rose in five of the last six election years.

CLICK ON IMAGE BELOW TO ENLARGE

Generally we expect that the improving macro-economic background will be the most substantive driver of a recovery in spending on leisure services this year, and growth in spending is forecast to be around 2.2% this year, which is stronger than the sector's 1.8% estimated growth in 2014.

Taken from
Spotlight: UK Commercial Leisure Q1 2015