Consumers are tightening their belts by reducing spending on dining out, takeaway food, and clothing purchases to save on non-essential expenses, despite inflation easing to 2 percent this year.
New data from KPMG reveals that four out of ten British households are cutting discretionary spending by an average of £77 per month. Nearly half of those surveyed reported no change in their non-essential expenditures in 2024.
According to Linda Ellett, head of consumer and retail at KPMG UK, households are adapting to or preparing for significant cost increases, such as higher mortgage or rent payments. She emphasised that while inflation has slowed, consumers are still facing overall budget constraints. Consumer price inflation has retreated to the Bank of England’s 2 percent target for the first time since 2021, down from a peak of 11.1 percent in October 2022. Despite this, households are beginning to see real wage growth after experiencing a decline in disposable income over the past two years. The Bank forecasts a gradual decline in interest rates to around 3.5 percent by 2026.
KPMG noted that spending reductions were most pronounced in restaurants, takeaways, clothing, beauty products, and subscription streaming services. About 5 percent of consumers reported making larger savings of £200 per month in 2024.Nearly a third of the 3,000 consumers surveyed indicated they were switching to cheaper food and drink brands and purchasing more discounted items.
Despite some savings strategies, Ellett observed a limited appetite for major purchases among consumers.
