According to new figures, households are preparing to make significant cuts to their spending in order to cope with the rising costs of energy bills and mortgage payments. A survey conducted by KPMG reveals that two-thirds of households plan to reduce non-essential expenses in the coming year, and 43% of those with savings are now using them to cover essential costs. This percentage rises to over 80% among low-income households.
In order to save money in 2023, households are planning to cut back on takeaways, dining out, and clothing. However, they are reluctant to reduce spending on their children and pets, with 15% and 13% respectively planning to make cuts in these areas. Only 4% of respondents stated that they intend to increase their spending in the new year, while one-fifth expressed concerns that essential costs will continue to rise.
The survey also revealed that households with savings plan to allocate 18% of their balance towards non-essential goods and services. Nearly 10% of respondents said they would spend more than half of their total savings. On average, those surveyed had a savings pot of £7,300, with London having the lowest average savings amount at £4,700. Additionally, 13% admitted to not having any savings at all.
KPMG’s Linda Ellett emphasized the importance of savings as a cushion for households but expressed concerns about the finite nature of these savings during the current economic environment. She noted that if the current situation continues for a prolonged period, it becomes increasingly worrying.
Despite the prevailing economic conditions, about one-third of households still plan to spend more on holidays in 2023 compared to 2022, making it the most popular category of non-essential spending. This is followed by home improvements and appliances.
Ellett stated that while the ability and willingness to spend on large-ticket items is limited in the current climate, there are still spending plans for holidays, home improvements, and appliances. She mentioned that consumers still enjoy treating themselves and others, so strategic retailers and brands can maintain revenues, if not volumes, by targeting their appeal to consumers.
However, Ellett cautioned that if the significant cuts in non-essential spending outlined in the research are realized, it may not be enough to prevent long-term negative effects on both brick-and-mortar and online retail in 2023.
Furthermore, KPMG’s survey found that 28% of households plan to shop more economically in the new year, with a third intending to purchase more own-brand and value goods. Approximately one-fifth of respondents stated that they would rely on premium home-cooked meals instead of eating out.
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