Consumers rein in Christmas spending plans as cost-of-living crisis intensifies

As Black Friday fas approaches, the latest EY Future Consumer Index finds that 43% of UK consumers expect to spend less over the festive season compared to 22% for the same period last year.

The 11th edition of the survey of over 1,000 Brits shows that falling consumer confidence due to the cost-of-living crisis will have an impact on a number of Christmas spending habits.

12% said they will be cutting back on celebrations and expect to have smaller events this festive season, 29% are planning savings on food, while 31% expect to spend less on alcohol.

Present giving will also be affected, with 43% planning on cutting back on gifts for friends, and 34% doing do so on gifts for family.

Consumers are also increasingly likely to do their bargain hunting in store this year, although online shopping remains key with two-fifths of shoppers looking to do most of their deal hunting online this year.

Silvia Rindone, EY UK&I Retail Lead, comments: “In the face of rising inflation, rising energy prices and rising interest rates, consumers are being cautious in the run up to Christmas.”

“Our survey shows that consumers are concerned about saving and affordability and are making more considered choices about what they spend their money on.”

“This year, consumers are likely to delay spending as late as possible to manage increased uncertainty about their finances. But with heavy discounting from major retailers starting very early, retailers are trying to tempt shoppers to bring forward their Christmas spending.”

“Consumers are going to be focusing less on indulgence and more on usefulness, so retailers and brands will need to ensure they have the right products in stock for smaller, more close-knit events and thoughtful gifting.”

With 67% of people ‘extremely concerned’ about the rising cost of living, up from 60% in June, shoppers are now implementing a raft of measures to cope, including cutting back on spending across all categories and increasingly shifting to private own-label alternatives. 

52% of consumers surveyed said they will spend less on big ticket items such as furniture, up from just over a third (39%) in February, while 47% say they will spend less on clothing and the same amount will spend less on consumer electronics. 42% will reduce spend on holidays and 41% on home improvement products and services.

The survey also finds that responsible consumerism is still a key consideration for shoppers, with 79% stating they don’t feel a need to keep up to date with the latest fashion trends and 68% noting they would prefer to repair than replace.

Rindone adds: “While affordability is a major concern for consumers, they still want to do the right thing from a sustainability perspective and responsible consumption ticks the box for both priorities.”

“This shift towards more considered shopping behaviour will have profound implications for brands and retailers, as consumers start to prioritise durability and quality over fashion.”