UK Consumers Show Increased Financial Optimism While Reducing Spending
TransUnion, a global information and insights company, has released its latest Consumer Pulse study, revealing that UK consumers are feeling more optimistic as the headline inflation rate begins to fall.
As signs suggest significantly improved economic fundamentals, consumers are reporting more positive sentiment. Overall, 37% of UK consumers are feeling optimistic about their household finances, up from just 28% in Q4 2022. The study also shows that Gen Z is leading this optimism, with over half (53%) feeling positive about their finances compared to 45% in the previous year.i
James Robinson, managing director of consumer interactive at TransUnion in the UK, commented: “While inflationary pressures on individuals have only recently begun to ease, it’s encouraging to see the uplift in consumer sentiment, indicating a gradual positive shift in financial outlook. However, this may take a while to translate into people feeling financially stronger, as we continue to see reports of cutting back on discretionary spend. Households with lower incomes, in particular, will likely need more support as the cost of living crisis persists.”
The figures show that while optimism is not universal, the proportion of UK consumers that expect their household income to grow within the next 12 months increased by four percentage points compared to Q3 2023.ii In the meantime, the percentage of those who didn’t know how they were going to pay their current bills or loans decreased by six percentage points among those who said they’ll be unable to pay at least one of their current bills and loans in full.iii
Recessionary behaviours persist
Recent months have seen energy prices in the UK stabiliseiv and October 2023 saw a decline in inflation rates to 4.7% from 6.3% in September.v Crucially for consumers, inflation is also anticipated to continue decreasing, enabling the Bank of England to maintain a steady policy rate of 5.25%.vi
Despite these shifts, a majority (60%) of consumers still believe that we’re in a recession or will be in one by the end of this year. While this is a significant improvement from 72% in Q3 2023, it reaffirms that consumers continue to remain vigilant, and that we may see a delay in any significant changes in consumer spending behaviour.
An indicative example is that almost seven in 10 (68%) of those who said we’re currently in a recession or heading for one by the end of this year, are preparing by reducing spending, building up savings (39%) and paying down their debts (22%). This cautious consumer response is likely to impact retail and economic performance, especially during the upcoming holiday season.
For more information on the Consumer Pulse study findings, please visit the TransUnion website.
Notes:
i TransUnion’s Q4 2022 Consumer Pulse study which is based on a survey of 981 adults in the UK conducted 3–14 Nov. 2022
ii 36.6% of consumers in the Q4 2023 TransUnion Consumer Pulse survey said they expect their household income to increase in the next 12 months. This is compared to 32.3% in the Q3 2023 Consumer Pulse survey.
iii 11% of consumers in the Q4 2023 TransUnion Consumer Pulse survey said they don’t know how they are going to pay their current bills or loans among those who said they’ll be unable to pay at least one of their current bills and loans in full. This is compared to 17% in the Q3 2023 Consumer Pulse study.
iv Office for National Statistics: Cost of living insights: Energy – 17 November 2023
v Consumer Prices Index including owner occupiers' housing costs (CPIH)
vi Office for National Statistics: Consumer price inflation, UK: October 2023
