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Two-thirds of UK consumers are planning to cut their discretionary spending in 2023 amid concerns about the cost of living, according to a survey.
Highlighting the pressure inflation is putting on households and the wider economy, accountancy firm KPMG said 61% of consumers in a poll of 3,000 were preparing to cut spending on eating out, holidays and other non-essential items.
Concerns about the cost of those basics – such as food, energy, fuel and mortgage or rent costs – as well as concerns about how far they could go, were the biggest deterrents to discretionary spending.
With inflation above 10% for the first time since the early 1980s, households across the UK are tightening their belts to accommodate rising gas and electricity bills and rising costs of the weekly shop, prompting the Bank of England to warn of a prolonged recession.
Official forecasts show that sky-high inflation will reduce average real wages and reduce living standards by 7% in the two years to the end of March 2024 – wiping out the previous eight years of growth.
Highlighting the unequal impact for some households, the KPMG survey shows that one in 10 adults have no savings. Only 4% said they would be able to increase their non-essential spending levels in 2023, while a quarter would stay at their 2022 levels.
Of those with savings, 43% said they were using it to meet essential expenses. This rises to more than 80% in some low-income household groups, reflecting the disproportionate impact of the cost of living on poor households.
One in 10 consumers expressed concern about energy bills after April, when the government increased the average bill cap for a typical household from £2,500 to £3,000, reducing the amount of support available to households. Consumers also cited the end of fixed-term mortgage deals, as well as variable-rate mortgages, as barriers to their spending.
A third of consumers plan to buy more own brand and value products in 2023, while a third will buy fewer items altogether, KPMG said. The most common areas to save on discretionary spending were eating out (46%), followed by clothing (42%) and takeaway (42%).
Linda Allett, head of UK consumer markets, retail and leisure at KPMG, said: “Current essential costs, fears of how high they will rise – including concerns about mortgage rates and energy price changes next year – are all factors in why two- we survey A third of consumers who did said they would have to cut back on their non-essential spending in 2023.
“To do so, consumers are increasingly changing how they shop to save money – including switching to cheaper retailers, buying more value or promotional products and swapping dining out for meals. It is important for brands and retailers to understand these trade-offs that may still occur. First choice for expenses.
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