Consumers scaling back spending due to energy spike and inflation

20 September 2022 2 min. read

With inflation on the rise, amid a sustained period of wage stagnation, consumer spending in the UK is dipping dramatically. A new report has found that electronic and furniture spending are set to take the biggest hits in the coming months.

As the UK’s economy seemingly heads for a recession, consumers are concerned about the impacts of record inflation on their everyday spending. According to a new report from global strategy advisory firm OC&C Strategy Consultants – which surveyed around 1,400 consumers above the age of 18 – over 80% of people are now concerned about energy bills, grocery prices and fuel prices.

Level of Consumer Concern, Overall

OC&C’s latest edition of its Consumer Sentiment Survey found that unsurprisingly, lower and middle income families were most concerned with the situation. Lower income families already finding it significantly harder to make ends meet – to the extent other research suggests they are forgoing pension contributions in order to get by – while older households without children generally have higher financial resilience, having already had the opportunity to build up savings.

Level of Consumer Concern, By consumer segment

When it comes to how people are making ends meet, big ticket items look likely to take the largest hit. Around half of all consumers expect to decrease their spending on furniture – with 27% expecting to reduce it by 20% or more – while electronic goods will see cut-backs from 48% of consumers. After the end of the lockdown era, some other items seem to still be ringfenced though. In particular, people remain determined to travel – with 46% of consumers due to spend more on international trips in the coming year.

Consumer Spend Outlook, H2 vs H1 2022

At the same time, discounts and promotions have taken on a greater importance for most shoppers – giving retailers a window of opportunity to attract customers, even amid the downturn. Especially in supermarkets, people are changing their behaviour, with 86% looking for discounts or deals. At the same time, 62% will downscale to cheaper brands or products, while more than half aim to cut out their spending on non-essential items.

Behaviour Changes across Grocery

Consumer sentiment outlook

A time of crashing consumer spending power will always strike fear into the hearts of retailers. Looking ahead, though, when comparing consumer sentiment towards planned spend in 2022 vs 2023, many market segments may still have reason for optimism. In particular, furniture spending is only being ‘delayed’ more than cut altogether, with 21% saying they would defer a purchase over 20% who said they would buy less, full-stop. The same is the case for electronics – suggesting the segments may bounce back quickly, despite being those where spending decreases most in the immediate future.

Consumer Spend Outlook, H1 2023 vs H1 2022

Commenting on the findings, OC&C noted, “Periods of uncertainty and change present leaders with the opportunity to come out on top. To do so however there’s a need for thoughtful and deliberate action. Those that act now can capture pockets of spend, lock in consumers and emerge as a winner.”