There is a growing disconnect in how the rising cost of living has been felt by consumer businesses leaders and their customers, states a new research from Accenture, stating that almost half of Britons feel their budgets are already being squeezed.
According to the study of UK executives and consumers, which was carried out in February before the invasion of Ukraine, while consumers in the UK have been feeling the squeeze of the rising cost of living acutely, the extent of this was being underestimated by consumer industry executives.
Just nine percent of UK consumer industry executives believed their customers had less disposable income than a year ago, and only 20 percent believed consumers are struggling with price increases.
On the contrary, UK consumers expect inflation to have a significant impact on their spending in the next year. 71 percent said it was the factor impacting their outlook on the economy the most, while almost half (49 percent) said their budgets are already being squeezed as a result of rising prices.
Due to the increasing pressure, there is a notable shift in the way people are planning to spend their cash, with a significant drop in discretionary spend.
For the retail sector, almost half (49 percent) expect to spend more on food and groceries, while other basic items such as home care essentials (33 percent) are also expected to take up more of people’s monthly budgets.
Meanwhile, planned spend on “luxuries” and “big ticket” items has plummeted, with 38 percent expecting to decrease spending on luxury products such as fashion or fragrances, and 34 percent expecting to spend less on clothes.
The study's findings came a day after Office for National Statistics (ONS) revealed that inflation surged to 7 per cent in March from 6.2 per cent in February, soaring to the highest level in three decades.
Commenting on the findings, Lynda Petherick, head of retail at Accenture in the UK & Ireland, said, “Consumers across the UK have been feeling the bite of the rising cost of living for some time, and we can anticipate this will get worse. While the full effect of this pressure on spending hadn’t yet been felt by business at the time of the research, it will likely become more pronounced in the coming months as consumers put their altered shopping plans into action.”
“Navigating the current external environment will be a balancing act for retailers. On the one hand, firms across all sectors are facing the impact of rising costs on their own operations and grappling with the best way to manage this.
“There is nevertheless an opportunity for retailers to make an impact here. Where possible, retailers should use the next few months to focus on increasing productivity and investing in digital to ensure they’re agile enough to continually adapt to changes in the market.
“Technology can enable employees to focus on business-critical tasks, whilst also reducing the retailers’ costs, minimising the need to pass on further costs to the customer at a time when value is a big consideration for the consumer. This will be important for brands to grow customer loyalty whilst boosting their competitive advantage with a more resilient approach to future disruption.”
