Inflation levels are skyrocketing, wage growth is stagnant and consumer confidence is approaching a three-decade low. Despite heaps of evidence showing that rising inflation is going to result in a grim future, many consumers are resisting any spending changes to deal with the changing times to come.
Global management consultancy L.E.K. has written about the insights which highlight just how unprepared U.K. consumers are for the reality of the effect inflation will have on their pockets.
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Perception VS Reality of UK Consumer Spending
- 44% of the consumers surveyed expect to not make any adjustments to their discretionary spending
- Yet 90% of the companies surveyed have increased their prices - 50% at least twice and 80% expect to make more increases in the next 12 months
- Most UK households need to reduce their spending by 3-4% to ensure not to be affected by the cost-of-living increases
Households will need to take caution to combat a dangerous mix of economic influences: rising energy and food prices, declining GDP, and stagnant wage growth.
Where Are Households Making a Cut?
U.K. consumers in different age groups have differing opinions on what is essential on which expenses should be cut first. The 64+ age group chose to cut clothing first, whereas 18-25-year-olds opted to remove or reduce takeouts.
Consumers in different income brackets also have different priorities in terms of curbing their spending with those on salaries of £20K and under choosing to cut clothing as the first priority, and those on salaries of £70K and over choosing to make sacrifices on the frequency of takeout meals.
What Will Be The Personal Impact of Inflation?
To understand the personal impact of inflation on the cost of living, L.E.K has created a calculator to help consumers in the U.K. to understand what to expect in any changes in their personal finances in the ever-changing economic climate.
What Do L.E.K. Experts Say?
“Our survey results show consumers at a tipping point as optimism remains strong but inflation realities begin to hit home,” said Dominic Miles, L.E.K. Partner and Global Co-Head of L.E.K.’s Consumer Sector.
How they plan to cut spending in the future varies by demographic and category - what will remain consistent is our commitment to monitoring the situation and advising our clients as the crisis takes hold,” he added.
L.E.K Partner Jean-Philippe Grosmaitre said, “As inflation settles in for the long-term, our survey shows that no industry is immune to its effects, but some businesses are set to fair better than others. Our focus is on helping all of our clients develop the resilience they need to ride out the storm and endure for the long-term.
About L.E.K. Consulting
We’re L.E.K. Consulting, a global strategy consultancy working with business leaders to seize competitive advantage and amplify growth. Our insights are catalysts that reshape the trajectory of our clients’ businesses, uncovering opportunities and empowering them to master their moments of truth.
