New research reveals cost of living crisis is starting to hit Britain
High-income households (£40,000 or more a year) are increasingly feeling pressure on their disposable income which is accelerating due to the cost of home crisis, according to research by Havas Media Group (HMG) UK. life.
Launched in April 2022 by the MG UK analytics team, the Cost of Living Study is the second wave of research looking at the impact of the cost of living crisis on UK citizens and their opinions . While low- and middle-income households continue to report facing increasing financial pressures, high-income households reported the largest wave-on-wave increase in feeling less financially comfortable (+10 percentage points – below, pp) only in April .
The second wave reveals that income compression leaves high-income households reporting that they are finding it increasingly difficult to pay grocery bills (+12 pp), to meet rents/mortgages (+9 pp ) and pay energy bills (+11 pp). These concerns lead consumers to expect further cuts in their spending, especially those of high-income households (+13 pp). They are also looking for ways to cut costs, including saving money on fuel (+8pp) and cutting grocery expenses (+11pp).
The big picture shows, unsurprisingly, that the economy is the main reason for their worries – more than a third (36%) of respondents see the UK economy as a top concern, an 8pp increase wave after wave . Almost three-quarters of respondents (73%) noticed sharp increases in the cost of goods and services since the first wave, compared to just over half (55%). Wave upon wave, the largest cost increases were felt in groceries (47% vs. 63%), restaurants and restaurants (23% vs. 34%) and gas/fuel (67% vs. 82%) .
The impact from one wave to the next is that consumers are increasingly likely to switch products, mainly in food and beverages (+5 pp). However, high-income households showed the largest increase in the likelihood of switching products overall wave after wave, particularly in computer and video games (+10 pp), electrical goods (+6 percentage points) and household items and furniture (+8 pp) .
Using the Meaningful Brands framework, the study explored the impact of the cost of living on the relationship between people and brands through three fundamental pillars: functional benefits (does the product or service offer it), personal benefits (how brands improve people’s lives) and collective benefits? benefits (what is their role in society).
Overall, between the two waves, the British have hardened their view on the three pillars. Group benefits are the mainstay to see the biggest wave-on-wave increase, with Brits expecting brands to be transparent and honest in their business and communications up 4pp. Meanwhile, the personal and functional perks to see the biggest increases are “help me save money” (+2pp) and offer fair prices (+1pp).
Laura Bebbington, Insight Managing Partner, Havas Media Group UK, explains: “The cost of living crisis has deepened and spread, with middle and upper income households and all age groups feeling the the effects. With inflation and its impacts now well established and growing nervousness around spending and job losses, people are tightening their belts to the max as the dark clouds of recession loom once again. We can expect to see impending energy price hikes and other financial pressures on household wallets increasing the impact of the cost of living on consumers in the coming months.
Tony Mattson, Head of Strategy at Havas Media Group UK, explains: “Our research shows that the impact of the economic downturn has become a problem for society as a whole and, unfortunately, it shows no signs of slowing down. On the contrary, the situation is likely to worsen. With limited markets, now is really the time for marketing to come to the fore. Contextual understanding will be key, so companies and their agencies can adapt to people’s changing needs, motivations and triggers. This means that clients and their agency partners are responsive to business needs, responsive to category dynamics and innovative in creating client value. Resilience and adaptability will be key to success.