Two-thirds of consumers plan to reduce their non-essential spending in 2023 as the cost of living bites.
One in ten consumers were concerned about energy bills after April, with UK households also worried about fixed-term mortgage deals coming to an end, and variable mortgage rates rising, as their barriers to spending.
The study by KPMG revealed that with essential costs like food, energy, fuel, mortgage or rent already being too high, and a concern about how high they still may yet go, families are cutting everywhere else.
Only 4% of consumers said they will be able to increase their non-essential spending levels in 2023. A quarter of consumers said their spend would stay at the same level as it was in 2022.
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“Current essential costs, fears of how high they’ll rise – including concerns about mortgage rate and energy price changes next year – are all factors in why two-thirds of consumers that we surveyed said they have to reduce their non-essential spending in 2023,” Linda Ellett, UK head of consumer markets, retail and leisure at KPMG, said.
“To do so, consumers are increasingly changing how they shop to save money – including switching to cheaper retailers, buying more value or promotional produce, and swapping eating out for meals in. Understanding these swaps is critical for brands and retailers looking to still be the first choice for spend,” she added.
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To cut costs, a third of consumers (28%) said they will shop more at less expensive retailers in 2023, whilst 33% say they will buy more own brand and value goods. 30% say they will buy fewer items.
One in five (19%) will buy more premium home cook meals instead of eating out – which is the most common non-essential spend cost-cutting target. One in 10 (12%) consumers say they will use credit more next year when shopping.
Around one in 10 (13%) consumers polled by KPMG have no savings. Amongst the remainder that have, the average savings balance is £7,371 heading into 2023. London was the region with the lowest savings average, at £4,725.
Of all the consumers with savings, 43% say they are using them to help meet their essential costs.
“Savings are now being used to help meet essential costs by nearly half of the consumers we surveyed, which provides a cushion – but these savings are finite and so the longer the current economic environment continues the more worrying it becomes,” Ellet said.