While lower-income earners are preparing to tighten their grip on their finances with nearly half cutting their spending on things like clothing, shoes and accessories, high-income consumers are maintaining their spending levels.
The survey of over 1,000 UK consumers found that 37 per cent of low and middle-income consumers are only purchasing the essentials, compared to 26 per cent in the last survey in February 2022. A third of these consumers (32 per cent) are now switching brands to try cheaper alternatives, up from 26 per cent in February.
Affordability has also risen in importance since February 2022, with 27 per cent of all consumers now adopting an “affordability first” mindset, an increase of 8 per cent.
The survey also found that consumers are taking decisive action when reacting to price rises on discretionary purchases. Nearly half of consumers (49 per cent) are buying less clothing, shoes and accessories, while in the consumer electronics category, 41 per cent are purchasing less and 14 per cent have stopped purchasing altogether.
The data highlighted the growing disparities between high-income consumers with low affordability concerns and low- to middle-income consumers with increasing affordability concerns – typical of a K-shaped recovery in which different groups experience different rates of recovery after a recession.
The EY research also found significant levels of pessimism among low-income consumers, with nearly half (46 per cent) saying that they feel financially worse off compared to February this year. Forty-four per cent (44 per cent) expect their financial situation to be worse in 12 months, while only 39 per cent feel in control of their lives – half the 79 per cent of high-income consumers who feel the same.
A significant minority of middle-income consumers are also bracing themselves for tough times with a third (33 per cent) expecting their financial situation to be worse in 12 months. Conversely, just 15 per cent of high-income consumers expect to be financially worse off in the next 12 months with 61 per cent of this income bracket saying they are excited about spending money on things that will improve their lifestyle.
Silvia Rindone, EY UK&I retail lead, said the research revealed that instead of consumer behaviour staying relatively consistent, consumers are drifting towards two extremes.
“At one end are cash-strapped consumers who are watching every penny, at the other are those who are willing to spend and want retailers and brands to excite and entice them to do so. Navigating this K-shaped profile in consumer behaviour is key to surviving and thriving in the new economic landscape,” she said.
Across all income groups, consumers are making more economical and sustainable choices. Of those surveyed, 90 per cent said they are trying not to waste food and 55 per cent are paying more attention to the environmental impact of what they purchase. Seventy per cent (70 per cent) also said they prefer to repair rather than replace.
Seventy-five per cent (75 per cent) of consumers surveyed said they are less interested in the latest fashion trends whilst 64 per cent said they feel less pressure to buy the latest technology.
