KPMG surveyed 3,000 consumers from across the UK at the beginning of December about their spending and saving plans for the coming year. Two-thirds (61%) said that they will have to cut back on non-essential spending in 2023.
Essential costs (food, energy, fuel, mortgage or rent) already being too high and a concern about how high they still may yet go were the two most common deterrents to being able to spend more on non-essential goods and services.
One in 10 consumers highlighted concern about energy bills after April. Consumers also cited fixed-term mortgage deals coming to an end and variable mortgage rates rising as their barriers to spending.
Only 4% of consumers said they will be able to increase their non-essential spending levels in 2023, while a quarter of consumers said their spending would stay at the same level as it was in 2022.
People looking to save money most commonly (46%) plan to do so by reducing their spend on eating out, followed by clothing (42%) and takeaways (42%). Pet products was the least selected (13%), followed by children’s clothing and toys (15%).
Commenting on the findings, Linda Ellett, UK head of consumer markets, retail and leisure for KPMG, said: “Current essential costs, fears of how high they’ll rise – including concerns about mortgage rate and energy price changes next year – are all factors in why two-thirds of consumers that we surveyed said they have to reduce their non-essential spending in 2023.
“To do so, consumers are increasingly changing how they shop to save money, including switching to cheaper retailers, buying more value or promotional produce, and swapping eating out for meals in. Understanding these swaps is critical for brands and retailers looking to still be the first choice for spend.”
Around one in ten (13%) consumers polled by KPMG have no savings. Amongst the remainder that have, the average savings balance is £7371 heading into 2023. London was the region with the lowest savings average, at £4725.
Of all the consumers with savings, 43% say they are using them to help meet their essential costs. This rises to over 80% amongst some low-income household groups that KPMG polled.
In 2023, on average, consumers with savings said they would spend 18% of their balance on non-essential goods or services. Only 8% said they would spend over half of their total. Holidays was the most common plan for non-essential spending using savings (for 30%), followed by home improvements and home appliances.