Recent figures show that 9 out of 10 households are reducing their spending on non-essentials to boost savings amid looming job market warnings.
The Bank of England (BoE) has predicted 250,000 job losses in the coming years as the UK’s economic growth stutters, while the BoE Deputy Governor said this week that “the UK is experiencing a sizeable economic shock.” *
UK householders appear to be taking pre-emptive action, with pubs, restaurants and fitness clubs among the most common areas where spending has been reigned in.
Over 90% of respondents to our study said they had made some cuts to their monthly outgoings between June and August 2016.
The biggest cuts have come to drinking and eating out (15%), fashion and beauty, and entertainment events (both 14%) and holidays (12%).
Gym memberships and media subscriptions have also taken a hit, but motoring appears to be off limits for most consumers, with just 6% cutting back on car and transport costs.
The research was carried out as part of our long-running Savings Gap campaign, which has involved over 22,000 people since it began in 2013.
Those questioned who had not made any cuts gave several reasons for their continued spending on non-essentials, including ‘I prefer to live in the moment’ (14%), ‘I like the finer things in life’ (10%) and ‘peer pressure’ (4%).
Meanwhile, 28% of respondents said they had taken on new debt in the last three months to make ends meet.
Our Senior Partner, Daniel Harrison said: “The cut in interest rates and the quantitative easing announced by the Bank of England were about encouraging people to spend but the opposite seems to be happening. Households are assessing their spending and making sure that they are able to withstand any bumps in the road ahead. That’s a sensible and understandable course of action but there’s little point in putting more into bank accounts that pay next to nothing in return.”
However, our recent analysis shows that savers continue to plough more into cash ISAs despite falling interest rates. Daniel Harrison added: “£10,000 in an instant access high street bank account for a year would be lucky to get more than £40 in interest. Every saver in the UK has a stocks and shares ISA allowance and I’d encourage them to use it and make their money work harder.”