Some 10 million households will demonstrate financial resilience this year, with spending power concentrated in London, the South-East and city locations throughout the UK.
That’s according to new analysis from Experian, which reveals more than a third (35%) of households are equipped to recover from temporary financial issues in 2023 despite the wider economic landscape. This may be in the form of a job loss, a relationship breakdown, or an unexpected emergency cost.
The analysis, conducted with Experian Mosaic, reveals the population groups which are most and least able to deal comfortably with the changing economic landscape. At a time when most organisations are seeking to understand the impact of the cost-of-living crisis on their customers, data-driven insights are crucial.
From understanding which customers might be most vulnerable, through to pricing and planning for product launches, organisations need to understand the impact that is being felt by the public, and how that influences what they can spend.
As expected, households within the ‘Prestige Positions’ and ‘City Prosperity’ groups were found to have the most protection from rising costs. Typically, these groups have high-paying, professional jobs, own large properties, are based in the South-East and working in London.
These wealthy households are not immune to the challenges of the cost of living and are making changes but the can still, largely, enjoy the lifestyle of previous years. These groups spend more than £2,000 a month on ‘non-essential’ costs such as eating out, holidays and new cars.
However, the analysis also found UK households’ discretionary income fell by 10% in 2022 and is expected to fall further this year, with an estimated drop of 19%. All Mosaic groups were found to have experienced a decline in discretionary income.
The least affluent households, typically low-income families and city residents in high density rental housing, will see reductions in spending power in excess of 25% – representing approximately nine million UK households.
This major reduction in spend will clearly impact businesses throughout the UK, and many companies will be seeking to understand their customer base to support them through this period.
Colin Grieves, Managing Director, Marketing Services, Experian UK&I, said: “Households across the UK have experienced various challenges over the last 12 months, with most forced to make cuts to everyday expenditure. Businesses are making similar decisions about how best they allocate resources, not only for advertising and marketing, but about how they can help their customers too.
“It is important organisations really understand how their customers are faring and recognise the changes which are happening. Understanding the evolving demographics of the UK is essential for organisations of all shapes and sizes, helping them to connect, engage and support people.”