UK Cost of Living Crisis:  What’s Next for UK Spending Habits?

Groceries and clothing are at the top of the list when it comes to budget adjustments, with 27% of people expecting to make some changes in these areas. With ongoing rising food prices since April 2022 which have only seen positive adjustments in recent months, it makes sense that grocery budgets are getting more attention.

With inflation pushing up food costs, it’s clear that people are going to prioritise essentials, which is reflected in the fall in grocery sales in the last year or so. Grocery stores can jump on this by promoting deals, discounts, and loyalty programs that help customers manage their food spending during tough times.

As for clothing, fashion sales in the UK have bounced back in 2023 to pre-Covid levels. However, with the slow economy, people are still seriously considering cutting back or shifting towards more sustainable fashion and pre-loved items. The clothing resale market in the UK grew by 149% between 2016 and 2022, and is forecasted to rise by 67.5% from 2022 to 2026 – Read More.

The sustainable clothes industry was valued at a million pounds in 2023, and is forecasted to grow at a CAGR of more than 12% from 2023 to 2028 – Read More

Increasing the focus on sustainability will help brands develop sales and will also support long term brand loyalty.  Brands should also see how they can tap into the second hand market to maximise their brand value and drive sales.

Around 25% of people plan to cut back on spending for entertainment. It’s that classic balancing act—trying to enjoy life while being financially cautious. Travel isn’t escaping scrutiny either, with 23% of respondents looking to make changes. With travel costs climbing, some are likely turning to staycations as a way to save money without sacrificing all the fun. In fact according to Statista in 2023, 63% of Britons planned a staycation, up from 42% in 2022 – Read More.

Businesses in these sectors can win over these budget-conscious consumers by offering discounts, bundles, or loyalty perks. For entertainment companies, subscription models or exclusive content could be a great way to keep people engaged without breaking the bank.
The shift in spending on entertainment and travel shows a change in priorities. While people still want to enjoy their leisure time, they’re just being more careful with their cash. For travel companies, this could be a great time to promote local holidays or staycation deals to attract those looking to save on travel costs.

Tech is also seeing some changes, with 15% of people planning to adjust their spending on gadgets like laptops, PCs, and gaming consoles.
iPhone has seen some slow down this year. It has been reported that in the first half of 2024, Apple shipped 95.3 million iPhones, which is a 2.46% decrease from the first half of 2023. This trend has also been reflected in PS 5 sales which have slowed down in 2024 compared to last year – Read More.

The economic stagnation has led to a lack of urgency to buy tech, resulting in longer sales cycles. It suggests that people are being more selective with their tech purchases and waiting longer to replace existing devices. The adoption of Windows 11 for both corporate and privately owned devices is forecasted to help sales 2025.

However, adversely, 14% of people are planning to adjust their spending on financial products like insurance and investments. This shows that many are taking a cautious but proactive approach to their financial planning in uncertain times. Financial companies can step in here by offering educational content and tailored advice to help people make smart decisions.

Interestingly, 12% of people are thinking about changing how much they donate to charity, which signals a continuing shift in financial priorities, leading to a potential impact non-profits. This downward trend has been identified over the last 5 years, with the number of people who regularly donate to charity having fallen from 65% in 2019 to 58% in 2023 – Read More.

For businesses, there’s an opportunity here to boost their CSR (Corporate Social Responsibility) efforts. Promoting charitable contributions can help attract customers who care about companies that give back but are finding it hard to make donations themselves.

The fact that charitable donations are under review shows that people are being more careful with their extra cash. But businesses that align with social causes can fill the gap, fostering goodwill and building loyalty among socially conscious customers.

Even with the UK cost of living changes in recent years, healthcare spending is set to change for 10% of people, which could point to rising healthcare costs or shifting health priorities. Private healthcare packages are increasing, a trend which has been seen since the pandemic, with a 30% increase in people paying out of their own pocket (Read More). With healthcare being such a big focus, businesses in this sector should capitalise on affordable wellness programs, preventative care, and cost-effective treatment options.

Finally, 10% of people are reconsidering their housing or property expenses. Whether it’s rent, mortgage payments, or property investments, this reflects caution in the housing market, which is facing challenges in terms of affordability and rising interest rates after the last two years of instability and peaks and troughs. House prices are now in the positive for 2024 and there are some signs of increased UK consumer confidence. This is a change from the end of 2023 which saw 41% of people say that they felt it was not a good time to buy (Read More).
People seem to be focusing on stability and long-term planning when it comes to property.

In short, UK consumers are navigating some pretty uncertain waters right now, and their spending habits reflect that, whether it’s cutting back on groceries and entertainment or being more cautious with travel and tech purchases. But for businesses, these insights are a chance to adapt and meet their customers’ evolving needs. Keeping an eye on these trends will help them stay ahead in a fast-changing market.