According to Retail Economics and retail technology firm Metapack research, nearly 60% of British customers believe they will cut back on non-food spending during the so-called "golden quarter" - the last three months of the year when most retailers make the majority of their profits.
According to the analysis, British shoppers will spend £4.4 billion less on non-essentials during this quarter, a 22% decrease from the same quarter in 2021.
This is a much bigger decline than in other European countries, where spending is predicted to fall by 14% in Spain, 12.3% in Italy, 11.5% in France, and 9.4% in Germany.
Retail Economics, an independent economics research consultancy focused on the UK consumer and retail industry, conducted consumer surveys in August 2022, with responses from a sample of over 8,000 nationally representative consumers from the UK, US, Canada, Australia, Germany, France, Italy, and Spain.
With increasing inflation and energy costs, the study comes at an inopportune time for UK retail. The UK government made efforts to relieve some of the burdens in September, unveiling details of a six-month energy price cap for businesses, setting the wholesale price of £211 per MWh for electricity and £75 per MWh for gas – cutting bills by more than 40%. Later that month, however, merchants expressed "severe worries" about the government's mini-Budget on September 23, calling it a "gamble" after chancellor Kwasi Kwarteng presented a slew of tax cuts.
"Inflation is poised to peak at exactly the wrong time for retailers," said Richard Lim, CEO of Retail Economics. Budgets of shoppers are already being squeezed, with inflation in international markets approaching decade highs. Consumers are worried, finances are being squeezed, and households plan to cut back this year as they battle to make ends meet.
"Against this deteriorating consumer environment, retailers are also confronted with a pincer movement of growing input and operating expenses, which is putting business models to the test." With profit margins under strong pressure, some merchants want to pass on expenses through delivery and return choices, which are precisely the areas that motivate consumers to seek alternatives."
According to the survey, online searches for the term "save money" have climbed in all of the areas studied. These searches reached a five-year high, with nations with higher inflation rates, such as Spain, the United States, and the United Kingdom, showing the most interest.