Cost-of-living crisis to cost households £65bn as nine in 10 cut spending

The report said an average UK household will be £2,300 worse off by the end of the crisis. Households have already taken a £50bn hit in spending power with £15bn more to come.

The report estimated the total financial hit from the cost of living crisis to be £65bn as almost nine in 10 households plan to cut spending in the current financial year.

Sixty-five per cent of consumers said they intend to hold back on ”most, if not all” areas of spending, up from 52% of consumers compared to the same time last year.

The report found 54% of UK consumers are cutting non-essential shopping while one in three consumers said they had switched to cheaper brands and changed the way they shop.

As 60% of the least affluent reduce spending on luxuries and switched to own-label, the report found the most affluent were five times less likely to change spending patterns with only one in 10 high-income households dining out less often.

Holidays emerged as a high priority falling above clothing, electricals and household goods among discretionary spending categories.

Nicola Sartori, head of M&A retail and consumer at Grant Thornton, said: “The ‘cut back economy’ continues to exert its unyielding influence on consumer behaviour, presenting formidable challenges for retail, leisure and hospitality businesses. Consumer confidence remains fragile, as the intention to cut back on non-essential purchases continues.

“The £54bn online sales boost during the pandemic can now be viewed as temporary as people are starting to prefer shopping in stores again, seeking value for money and in-person shopping experiences.

”However, the way that customers research and decide how to buy has become more complex, and people are still prioritising online to find good deals and manage spending. To navigate this uncertainty, it is crucial for businesses to build this changing consumer behaviour into their long-term strategies.”

Richard Lim, chief executive of Retail Economics added: “The relentless rise in interest rates has completely changed the narrative around the cost-of-living crisis. What started as a crisis among the least affluent households has evolved to capture a much wider array of income groups as housing affordability comes under enormous pressure.

”As pandemic savings have been whittled away, the squeeze on finances has become a war of attrition for many households. While peak inflation may have passed, households still have around 10 months of pain to come where cutting back spending will intensify for many households.”