‘Most Britons plan to cut discretionary spending to cover essentials’

Most Britons are planning to cut back on their non-essential spending over the next year, states a new report on Tuesday (19).  

According to new research by Grant Thornton and Retail Economics, 90 per cent of UK consumers plan to cut back on their non-essential spending over the next year, resulting in £24.9bn of discretionary spending being reduced across the economy.    

More worryingly for retailers and the wider economy, 41 per cent of consumers expect the current squeeze on living standards to impact their spending habits until at least the end of 2023.  

The research attributed the spending slowdown to the cost-of-living crisis, as consumers face rapid inflation, rising interest rates, and higher taxes, resulting in household finances being tested from all angles. It noted that consumer confidence has plummeted to record lows, as squeezed incomes, political instability, and genuine fears of an oncoming recession signal the arrival of a “Cut-Back Economy”.  

Consumers said the reduction in discretionary spending will largely go towards helping them cover essentials such as food, fuel and energy bills. Additionally, 28 per cent of those planning to cut back said they intend to do so across all areas of their spending.  

The typical UK household is set to cut back £887 of their discretionary spending through to April 2023, based on economic modelling within the report. Many plan to adopt recessionary behaviours by trading down, shopping less, or sacrificing purchases altogether. Fifty per cent of shoppers said they will switch to cheaper brands or retailers to combat cost pressures, while 43 per cent plan to make fewer non-essential shopping trips.  

Loyalty will also emerge as a key battleground for retailers and brands – 36 per cent of consumers are looking to make savings by making better use of loyalty schemes.  

The research further found that 36 per cent of UK households are ‘Financially Distressed’ and plan to cut back across most (if not all) of their non-essential spending. Twenty-five per cent are ‘Squeezed Spenders’, who recognise the need to cut back on some of their spending but generally prefer to borrow, dip into savings or use buy now pay later schemes rather than let money worries get in the way of their desires.  

Another 25 per cent are classified as “Comfortable Cautious” consumers, who are financially secure but still worry about the cost-of-living crisis, choosing to cut back on some of their spending out of precaution. Only 14 per cent of households are “Financially Immune” with no plans to cut back their spending.