KPMG UK highlights the scale of reduction in consumer spending so far in 2023 and indicates how households may respond if they no longer receive energy bill support payments from April.
The Government’s Energy Bills Support Scheme provided a monthly discount of around £67 from October through to March 2023, but support will now move to being means tested.
Half of consumers surveyed by KPMG as part of its Consumer Pulse survey said they would cut non-essential spend, while a third would use savings to help meet energy costs, should they no longer receive bills support payments.
The same proportion of consumers said they would have also taken the same actions – had the Government not extended the energy price guarantee from April.
So far in 2023, 55% of consumers have reduced their non-essential spending, with the cost of utilities bills cited as being their biggest barrier to spending more income or savings on discretionary items in the next three months.
Half of respondents also reported their mobile phone plan was increasing in cost from April, while half also said that their broadband plan price was rising. Only one in 10 said that their price plans for either weren’t increasing.
Linda Ellett, UK Head of Consumer Markets, Retail and Leisure for KPMG, said, “With energy, mobile, and broadband costs set to rise for many households from April, a number of consumers will likely have to further cut back their discretionary spending.
“Already in 2023, over half of the consumers that we spoke with have reduced their non-essential spend. Buying behaviour also continues to change as shoppers look to lower costs – including switching to discounters, buying more own brand and value produce, and searching out promotional prices.”
When asked about their buying behaviour when shopping so far this year, the 3,000 consumers surveyed said they were:
- Buying more own brand/value: 37%
- Buying more promotion/discount items: 36%
- Spending more time looking for bargains: 33%
- Buying fewer items: 33%
- Switching brands: 31%
- Switching to cheaper retailers: 29%
- Buying from multiple stores: 29%
- Spending more on credit: 11%
A third of consumers surveyed reported using their savings to help meet their essential costs. Two thirds with savings say they don’t currently need to use savings for this. The average amount of savings in the bank among the group was £7,744.
Among those with savings, 41% are yet to purchase any big ticket items so far this year – with 34% saying they won’t do so in the rest of 2023 either. Among those who have spent savings on major purchases so far this year, home improvements were the most common spend (for 22% of people). Home improvements is also the most common savings spending intention for the rest of the year (for a third of people), followed by a holiday (for a quarter).
Ellett added, “With so many households squeezed by higher prices, a third of consumers with savings are using them to help meet their essential costs, while 40% didn’t make any major purchases using savings so far in 2023.
“Appetite for major purchase spending does still exist for the rest of the year though amongst two-thirds of consumers with savings. But unlocking that spend will be dependent on whether and when essential costs stop rising.”
Overall feeling of financial security so far in 2023 is largely balanced among consumers – with 25% feeling more secure than when the year began, 29% feeling less secure, and 45% feeling the same as they did when the year began.