The survey found that 67 per cent of consumers are now ‘extremely concerned’ about the rising cost of living and as a consequence spending on gifts will be significantly lower, with nearly one-third (34 per cent) planning on spending less on presents for friends and family.
The 11th edition of the survey of over 1,000 UK consumers found that falling consumer confidence due to the cost-of-living crisis will have an impact on a number of Christmas spending habits.
One in ten (12 per cent) shoppers said they will be cutting back on celebrations and expect to have smaller events this festive season, more than one in four (29 per cent) are planning savings on food, while nearly one in three (31 per cent) expect to spend less on alcohol.
Present giving will also be affected, with 43 per cent of consumers planning on cutting back on gifts for friends and 34 per cent planning on cutting back on gifts for family.
The survey also found that consumers are increasingly likely to do their bargain hunting in-store this year, although online shopping remains key with two-fifths (41 per cent) of shoppers planning on doing most of their deal hunting online this year.
Silvia Rindone, EY UK&I retail lead, said 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,” she said.
“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.”
The EY Future Consumer Index surveyed UK consumers just after the mini-budget in October and found consumer confidence at a record low, with just 26 per cent of respondents saying they are confident about the future, down from 50 per cent in June. Sixty-nine per cent of consumers said they did not expect the economy to recover in the next 12 months, up from 31 per cent in June, while 43 per cent of consumers expect to be financially worse off in 12 months.
As identified in the last edition of the survey (published in June 2022), there continues to be a widening gap between cash-strapped consumers watching every penny and those who are willing and able to spend if retailers can entice them to do so. High-income consumers are more than three times less likely to see themselves as being financially worse off this time next year (14 per cent) than low-income consumers (51 per cent).
“As consumers look to cut back spending, retailers and brands will need to understand the price sensitivity of their customers and react accordingly if they want to continue to win spend in the run up to Christmas,” Ms Rindone said.
“Navigating this K-shaped consumer profile will require retailers to cater to financially resilient high-income consumers, while also appealing to mid- and low-income consumers with value-focused ranges and pricing that reflect their budgets.”
More than half (52 per cent) of consumers surveyed said they will spend less on big-ticket items such as furniture, up from just over a third (39 per cent) in February, while 47 per cent said they will spend less on clothing and the same amount will spend less on consumer electronics. Forty-two (42 per cent) per cent are planning on reducing spend on holidays and 41 per cent on home improvement products and services.
The survey also found that responsible consumerism is still a key consideration for shoppers, with more than three-quarters (79 per cent) saying they don’t feel a need to keep up to date with the latest fashion trends and more than two-thirds (68 per cent) saying they would prefer to repair than replace.
