Budget Britain: Inflation forces families to trade down and opt for staycations
Britons are trading down to cheaper products and are opting to holiday at home in response to rampant inflation and higher interest rates squeezing their budgets, new research out today shows.
Some 40 per cent of families have been buying more value or own brand products in 2023, according to analysis from consultancy KPMG.
The same proportion have been seeking out stores’ promotional or discounted goods to help withstand the pressure on their budgets from the cost of living crunch.
Holidaymakers are also opting to stay in the UK for their summer breaks to avoid higher travel costs. KPMG said more than two in five families intend to head to Britain’s seasides and green pastures for their summer getaway, mainly due to a third expecting airlines to charge higher ticket prices.
Mounting signs of consumers trading down has propelled the share prices of companies offering products at more affordable prices.
FTSE 100-listed and discount retailer B&M has climbed nearly 40 per cent so far in 2023. German value supermarkets Aldi and Lidl have been steadily increasing their market share over the last year, according to data from Kantar.
Meanwhile, more high-end listed firms have struggled. Online supermarket and middle-class favourite Ocado’s share price has slimmed more than 16 per cent so far this year.
Resistant price pressures have lured the Bank of England into 13 straight interest rate rises, pushing them to five per cent, the highest since 2008.
“It’s unsurprising that in this landscape of higher cost pressures that many consumers continue to take steps to reduce costs where they can,” Linda Ellett, UK head of consumer markets, retail and leisure for KPMG, said.
Restaurants are bearing the brunt of Brits reining in spending on non-essential items.
Some 71 per cent of the 3,000 consumers surveyed by KPMG said they have cut back on eating out, while 62 per cent are shunning takeaways more frequently.
Sky high food and energy bills are eating up cash that could have otherwise been spent on treats.
Alarmingly, KPMG found 34 per cent of families are reducing non-essential spending due to crippling mortgage bills.
That share is set to rise further in the coming months as millions of homeowners remortgage on to contracts with much higher rates.
According to financial data provider Moneyfacts, the average rate on the 2-year mortgage is more than 6.2 per cent, still lower than the around 6.6 per cent reached in the weeks after the mini budget.
Analysis by the Institute for Fiscal Studies has found 1.4m property owners will have 20 per cent of their disposable income taken away from them by more punitive mortgage repayments.