Brits are reining in their spending on everyday items amid falling confidence in the UK economy, a survey shows. The results will be a fresh blow to Chancellor Rachel Reeves on the eve of her Spring Statment on Wednesday (March 26).
Research from KPMG shows more and more people in the UK think the economy is going in the wrong direction. Of three thousand consumers surveyed, KPMG found 58% feel the economy worsened in the three months to the end of February. This represents a 15 percentage point rise on the three months to the end of November.
Despite a majority of the survey respondents saying they feel secure financially, growing perceptions of economic gloom have prompted more consumers to cut their spending and change their spending habits, according to the survey.
Reduced spending on everyday items was reported by 43% of those surveyed, with over a third saying they were saving more for a rainy day. Almost a third (29%) said they were putting off purchases of big ticket items.
Linda Ellett, Head of Consumer, Retail and Leisure at KPMG UK, said: “Our research continues to show that while only a minority of consumers feel financially insecure, the majority feel that the economy is heading in the wrong direction.
“And this nervousness about the economy is leading many, including some of those who are secure in their current personal financial circumstances, to cut everyday spend, defer big ticket buying and save more.”
She added that some may be taking this action as they prepare for higher costs, such as a new mortgage deal or the higher cost of travel, but other “cautious” consumers are “certainly” preparing for the potential impact on them of what they believe to be a worsening economy.
Ms Ellett said: “This week’s Spring Statement needs to give people the confidence in the longer-term UK economic outlook.”
KPMG’s survey also shows the percentage of people who feel insecure about their personal finances nudging up from 21% to 24%.
Of these, two percent said they had gotten into debt to pay their bills while 15% said they had been forced to cut discretionary spending to pay for essential items.
Meanwhile, in cheerier news for the Chancellor, new data shows activity across the UK’s private sector has grown at the fastest rate for six months after strong trading in the service industry.
The S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 52 in March, up from 50.5 in February.
The flash figures are based on preliminary data. Any score above 50.0 indicates that activity is growing while any score below means it is contracting.
The latest reading was stronger than expected, with a consensus of analysts having predicted a reading of 51 for the month. Economists cautioned the uptick in activity “doesn’t signal a recovery”.
Ms Reeves is to deliver the Spring Statement to the Commons on Wednesday, when she is expected to announce spending cuts for some Government departments.
The fiscal tightening comes amid a backdrop of cuts the Government has already announced to the welfare bill, and to Civil Service running costs, which have caused unrest among some Labour backbenchers and the unions.
Ms Reeves has repeatedly said she will not budge from her fiscal rules, which prevent her from borrowing to fund day-to-day spending.
This has led to mounting pressure over how to balance the books – by raising taxes or cutting spending – amid disappointing growth figures and higher-than-expected borrowing. The Chancellor told The Sun she would not be raising taxes in the Spring Statement.
