New research released by KPMG UK highlights the scale of reduction in consumer spending so far in 2023 and indicates how households may respond when they no longer receive energy bill support payments from April. T
he UK Government’s Energy Bills Support Scheme provided a monthly discount of £66/£67 from October to March, but unlike the £2,500 Energy Price Guarantee which has been extended until July, it has now ended.
Half of consumers surveyed by KPMG UK as part of its Consumer Pulse study, said they would cut non-essential spending, while a third indicated they would be using savings to help meet energy costs from April onwards to compensate for the loss of the monthly state support.
So far in 2023, 46 per cent of Scots 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.
When asked about their buying behaviour when shopping so far this year, the 250 Scotland-based consumers surveyed said they were:
- Buying more own brand/value - 30%
- Buying more promotion/discount items - 37%
- Spending more time looking for bargains - 32%
- Buying fewer items - 35%
- Switching brands - 26%
- Switching to cheaper retailers - 28%
- Buying from multiple stores - 26%
- Spending more on credit - 9%
A third of consumers surveyed reported using their savings to help meet their essential costs. While two-thirds with savings said they don’t currently need to use savings for this. The average amount of savings in the bank among the group was £7,253.
Among those with savings, 43 per cent have yet to purchase any big ticket items so far this year - with 35 per cent saying they won’t do so in the rest of 2023 either.
Among those who have spent savings on major purchases so far in 2023, home improvements were the most common spend (for 24% 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).
Commenting on the findings, 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.”
She continued: “With so many households squeezed by higher prices, a third of consumers with savings are using them to help meet their essential costs, while 43 per cent 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 among two-thirds of consumers with savings. But unlocking that spend will be dependent on whether and when essential costs stop rising.”
Overall feelings of financial security so far in 2023 are largely balanced among consumers, with 28 per cent feeling more secure than when the year began. Some 28 per cent feel less secure, and 43 per cent feel the same as they did when the year started.
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