Consumers Take a “Direct Hit” as Cost-of-Living Crisis Eats into Christmas Finances

According to a survey among 1,000 consumers, 50% of those surveyed plan to spend less on socialising as the impact of the cost-of-living crisis begins to hit hard in the lead up to Christmas.

Asked where they had already cut back in the last three months, the top three answers were energy usage in response to soaring energy costs (45% said they had cut back), eating out (41% had cut back) and ordering takeaways (34% had cut back). Most starkly, the survey found the average spend for Christmas is down 16% from £554 to £463 this year.

It also found over a third (37%) had no money left at the end of the month after paying for food, energy and household bills; with 83% ‘very’ or ‘quite concerned’ about the cost-of-living crisis. The survey, on behalf of RSM UK, the leading tax, audit and consulting firm, was conducted a week after the chancellor’s Autumn Statement on 17 November which focused on tax rises, spending cuts and austerity measures.

Paul Newman, head of leisure and hospitality at RSM UK, said:
‘The festive trading period is when most hospitality businesses make the majority of their profits for the whole calendar year. With last year’s festivities severely impacted by Omicron, 2022 needs to deliver if the sector is to avoid a grim start to 2023 with a swathe of closures and job losses.

‘The cost-of-living pressures are palpable with consumers now seeing the direct impact on their finances at the end of each month. Stark choices are having to be made over Christmas celebrations with a majority being forced to cut their cloth accordingly. This sector has rolled with the punches since the start of the pandemic and a sustained period of uninterrupted trading over the festive period is seen as crucial in building depleted cash reserves.

The World Cup is providing some welcome respite as fans come together to celebrate in their local pubs but upcoming industrial unrest alongside fragile consumer confidence will only add to the sector’s woes. A 50% planned cut back in spending on socialising could signal the writing on the wall for some businesses which are already teetering on the edge and need a strong Christmas to survive to fight another day.’

The survey also found 49% expect to spend less on clothing during the festive period and toys, presents and stocking fillers will also take a hit with consumers planning to cut their spend on them by 43%, 42% and 40% respectively.

Commenting on the survey results, Jacqui Baker, head of retail at RSM UK, said:
‘Consumers’ finances are taking a hit and they have little choice but to tighten their belts. Our survey showed that nearly every category across retail would be impacted by dwindling discretionary spend this Christmas which is bad news following mixed results during Black Friday.

‘The worst news came for fashion retailers who need to shift the multitudes of sequins they buy for the festive party season. Consumer footfall has been falling in recent weeks and the rail strikes are only adding to dampening consumer demand. On top of this, the mail strikes are seriously impacting on delivery times and turning consumers away, creating more headaches for retailers.’

Jacqui Baker concluded:

‘Overall Christmas looks likely to be a more subdued affair this year, which doesn’t bode well for these final weeks of the all-important Golden Quarter. Many retailers made their orders several months ago thinking this was the first proper Christmas for two years and the public would go all out. January will be a telling time when we see just how much stock is left on retailers’ shelves versus dwindling bank balances.’