This week, all eyes were on the Bank of England and Ofgem.
While the base rate went up slightly, it won’t make a huge difference to UK households. In contrast, the energy price cap has gone up by 54%. And with inflation continuing to drive the cost of living up, 2022 is set to be financially challenging for Britons. According to the Resolution Foundation, the number of households that will face ‘fuel stress’ will rise to 6.3 million when the cap rises in April.
Here, I take a look at the impact of the pandemic on the spending attitudes of the British population.
[top_pitch]
The fallout from the pandemic
The last two years have been characterised by fear and uncertainty, making them particularly challenging for many in the UK. And according to Toluna’s Global Consumer Barometer Study, it was not only our finances that took a hit. Our spending behaviours and attitudes were also affected. The survey taps into a community panel of more than 36 million members around the world, providing a snapshot of current consumer perceptions.
The latest research reveals troubling trends for the British public. Out of the 1,066 Britons surveyed, almost half (44%) currently have less money than they did before the pandemic began. More than one in three (37%) are increasingly concerned about spending money over the coming months. And one in five (21%) are still concerned about the prospect of losing their job.
Tighter finances affect spending behaviour
Both long- and short-term spending behaviour have suffered as a result of financial difficulties. The rising cost of living is driving many Britons to make tough choices when it comes to their purchases:
- 54% of respondents say that the price of a brand is the major factor behind their choice.
- Currently, only 14% consider environmental factors or sustainability when making a purchase.
[middle_pitch]
According to Lucia Juliano, head of research UK & NL at Toluna, the unpredictability of the pandemic and its impact will have a long-lasting effect on consumer behaviour. And with rising energy and household bills, as well as inflation, this creates “a perfect storm of financial worries and uncertainty”.
With restrictions slowly lifting and international travel back on the cards, it is apparent that the desire to spend money on such activities is a lot weaker than before the pandemic. And as the financial household squeeze continues, people will focus on saving rather than spending money.
A Christmas to forget
While social distancing was a major barrier for Christmans 2020, finances weighed heavily on people minds in 2021. Almost half of the respondents (48%) say they were concerned about whether they could afford Christmas. And one in ten say they had extreme concerns due to their financial circumstances.
Borrowing money to afford Christmas was the unfortunate outcome for almost two in five (38%). And a third (33%) of those surveyed ended up spending less on Christmas shopping in 2021 due to changes in their financial situation.
The outlook for the year ahead
Brits’ spending choices will continue to be governed by financial insecurity. According to the survey results, 49% of people’s Christmas spending was heavily influenced by the new Covid-19 variant, economic uncertainty and the rising cost of living.
Of those surveyed, 57% are particularly concerned about rising energy costs. This is impacting their decisions when it comes to smaller day-to-day purchases as much as larger ones. In that regard, 32% of people intend to spend less on holiday and leisure in 2022, while a third (33%) plan to scale down how often they go out to eat.
