The development of the UK economy looks set to come under additional pressure in the coming months, as customers even more downsize their purchases in 2023. As the federal government withdraws what little bit support was on deal for homes handling spiralling energy costs, and inflation still expanding, over half of UK homeowners have already cut their ‘non-essential’ spending.
‘Non-essential’ spending is a greatly politicised term, typically bandied about as sensible shorthand for spending on items people cannot work without. That is usually presumed to be lease or home mortgage payments, costs, food and transportation to work – while practically whatever else is categorised as ‘non-essential’. That suggests along with things broadly comprehended as unneeded for a life worth living – for instance, impulse purchases, eating in restaurants, or jewellery – products like family pet food and electronic devices are likewise thought about high-ends.
In a progressively digital world – in which whatever from banking to job-hunting, to income tax return and federal government services is moving into app-based interactions – categorizing electronic devices which allow using those services as ‘unnecessary’ is perhaps narrow-minded. Similarly, owning a family pet is typically thought about ‘optional’ and for that reason its costs are likewise identified as discretionary, in spite of the tested psychological health advantages of animal guardianship – something companies allegedly have a terrific interest in, a minimum of with regard to a person’s efficiency in the work environment. Arguably, spending on something which allows them to work better is as ‘essential’ as the transportation which gets them to the workplace, then.
When reports like KPMG’s recent Consumer Pulse Survey are launched, politicised presumptions around non-essential spending typically see them minimized, in this case. A typical line is that working class customers need to ‘spend within their means’, and if they just tighten their proverbial belts, whatever will be great – they still have food and shelter, after all. But this underestimates the wider-ranging impacts so-called non-essential spending has on the lives of those people, and their ability to adequately function at work or in society.
KPMG’s finding that 55% of customers reduced their non-essential spending since the start of 2023 will have broader implications than people just making do with fewer shiny things in their house. As 20% of shoppers cut back on technology spending, 25% reduce their use of transport, 32% forego spending on home maintenance and improvements, and 17% reduce fitness spending, a portion of the UK’s working population will be left less able to participate in digital life, while finding themselves more isolated, less physically fit, and in homes which are less fit for purpose.
Amid this, living standards are set to fall by 7% in the UK over the next two years, according to the Office for Budget Responsibility. Partially, this is because alongside energy companies, other utility providers are also looking to cash in on the current economic picture – well above the rate of inflation they are citing as the reason for price hikes. A 51% majority told KPMG that broadband prices had risen since the start of 2023, alongside 49% of mobile users. This is likely to be compounded in the coming months, with millions of consumers with O2 and Virgin Mobile contracts facing 17.3% increases in their bills for making calls, sending texts and using data – with the UK’s current 12-month inflation rate sitting at 10.1%.
This is some distance from the predictions of some experts at the start of the year, who suggested that to avoid becoming the target of political campaigns, the self-regulated telecoms sector would actually implement price rises below the rate of inflation. Either way, though, telecoms will remain less of a strain than energy bills in the coming months. With the government planning to greatly reduce those supported with their electricity and gas payments in 2023, and the energy price-cap set to rise to £3,000 per-year in July, half of consumers say they will have to further reduce their non-essential spending to cope.
Linda Ellett, UK Head of Consumer Markets, Retail and Leisure for KPMG, commented, “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.”
Beyond the social and human effects of this, the decline in consumer spending power still to come is likely to further impact the UK’s economic health throughout the year. The country has been flirting with recession for months, and according to previous KPMG research, the chief cause of the UK’s current slump is a fall in consumer confidence. The firm found shrinking wages in real-terms had minimized consumer spending, seeing business growth across the country grind to a halt – additional bringing the idea of ‘non-essential’ spending into concern.
