UK households are bracing for a new cost of living crisis, according to a report from accountancy firm PwC. The quarterly survey, which measures factors such as consumers' spending intentions and perceived financial well-being, recorded a score of -13 in April. This marks a sharp fall from -1 in January and represents the lowest level since autumn 2023.
Sharp Decline in Household Finances
The survey reveals the biggest quarterly drop in perceived household finances since 2022. There has been a 7% decline in those reporting healthy finances—meaning they have money left at the end of the month for luxuries or savings—since January. Concurrently, there has been a 4% rise in those struggling or in trouble, defined as missing bills or loan repayments or being in danger of doing so.
Under-35s have been hardest hit, with a 20% fall in those feeling financially healthy and a 9% increase in those struggling or in trouble.
Top Consumer Concerns
Almost 90% of consumers say they are concerned about the cost of living, making it the top concern, particularly among middle age groups (35-54 year olds) and the less affluent. The other joint top concern is the UK economy (almost 90%), followed by global events (87%). Other significant rises this quarter include concern about household earnings (up to 63% from 58%) and mortgage repayments or rent going up (up to 44% from 36%).
Impact on Spending and Businesses
Sam Waller, leader of industry for consumer markets at PwC UK, said: “Rising costs are prompting shoppers to pull back spend across the board, and it’s expected sentiment will get worse before it gets better, as consumers face higher energy and food costs later in the year.”
Rick Jones, Hospitality and Leisure sector lead at PwC UK, added: “This change in sentiment clearly suggests discretionary spending is set to be reined in by consumers in the short-term. While most of the downward swing in spending intentions is directed at retail moments, eating out and hospitality, travel and leisure companies also need to act now.”
Jones advised: “For high street hospitality operators, this will mean continuing to focus on providing great experiences and communicating value for money offerings to drive footfall. Also, pubs, bars and other leisure and hospitality businesses will be hoping the World Cup this summer can provide a timely boost to trade. For holiday operators, offering consumers flexible terms and alternative options could help remove barriers to early bookings.”
Risk of Insolvencies
Zelf Hussain, Restructuring and Insolvency partner at PwC UK, commented: “With retail and consumer business more exposed to the current market conditions, now will be the time for owners to look at whether transactions, either merger or divesting, or restructuring will put their organisations on surer financial footing. Company insolvencies in the first quarter of this year have already seen an increase month to month and with consumers cutting back combined with the rising cost of fuel and inventory, we may see this trend continue upwards unless businesses take action.”
