Our latest piece of research delves into people’s spending habits during the cost of living crisis, helping us understand the best way to support our customers during the current economic climate. This research follows on from our last cost of living survey in 2022, so we ask, what’s changed? And are we feeling different to how we felt over a year ago?
The surveys involve 2,000 people, aged 21-55+ with incomes ranging from £18k to more than £100k. We asked a series of questions relating to their spending habits, feelings toward the rising cost of living and how they’re using their savings.
We found people still aren’t very confident when it comes to managing their finances, they’re struggling to save and they’re looking to cut back on spending where they can. However, things are looking slightly more positive now with less concerns across the board, and early signs of economic recovery.
What is the cost of living crisis?
The phrase “cost of living” refers to the usual, everyday expenses that a typical household has. Car payments, mortgages, groceries, all of it falls under the cost of living. Due to various economic factors, the UK is currently in a situation where the cost of living has increased beyond the rate at which households can cope, leading to a crisis.
How much has the cost of living gone up?
Analysing inflation – which measures the rate at which consumer prices rise – is the best way to determine whether the cost of living has changed. The UK saw a sharp increase in inflation in 2021 and 2022 post pandemic, reaching a peak of 11.1% in October 2022*. A year later, inflation rates have decreased by more than half and currently sit at 4.6% as of October 2023. Despite these improvements, our research puts inflation as the second biggest financial concern among households, with 61% saying that’s the case.
Your spending habits
Unsurprisingly, the cost of living crisis had a major impact on both spending and saving habits. We found just over half of people cutting their costs and saving with the cost of living in mind, while three quarters of UK households (76%) worried about the cost of living.
64%
Putting away less this year
45%
Reduced the money they spend on dining out
46%
Dipping into savings
45%
Spent less on luxury goods and 55% are spending less on groceries
15%
Saving for Christmas
80%
Were most concerned about energy prices, making it the biggest concern
51%
Spending more on subscriptions
45%
Cut spending on holidays
Savings
This time, 65% of people said they thought they’d be putting away less – a reduction of 10% compared to 2022.
Almost half had to dip into savings for everyday expenses (46%). Dining out, luxury goods and grocery shopping continue to see the biggest cuts on spending overall, albeit at roughly 10% less so than 2022.
Christmas
December has always been a big month for retailers, drawing in shoppers to boost sales. However, our research showed cost-conscious consumers were continuing to curb spend over the Christmas period. Our latest data shows that, across all regions, only 16% of people claimed to be saving for Christmas 2023.
Emergency funds
Less people were saving for an emergency, with 49% of participants creating an emergency cost of living savings pot.
52% of people were concerned about rising interest rates and subsequent loan repayments, while 54% plan to move their savings to get the best return.
Entertainment subscriptions
Interestingly, it appears that at-home entertainment became more of a priority for people in 2023. 32% of people said they reduced their costs on monthly subscriptions, compared to 83% in 2022 – a major 51% difference.
Take a look at our latest savings account rates here.
Who was impacted most?
No one is immune to the rising cost of living, but we found age is playing a part in how people are saving and how worried they are about their finances.
76%
Impacted by cost of living crisis
72%
are concerned about managing their finances
60+
year olds were least concerned
30
year olds are most likely to cut back on their grocery shopping
56%
of 20-30 year olds were concerned about fuel
50%
are the most concerned about the cost of living
40+
year olds were most concerned
60%
are most concerned about energy prices
Those under 50 years were, on average, more concerned than those over 50, with 41-50 year olds being the most concerned about the rising cost of living (40.7%) – that same age group were the most concerned about rising fuel and electricity tariffs (37.8%). Those over 80 were the least concerned (0.7%).
Looking to interest rates and subsequent increased loan repayments, we see that 51-60 year olds were the most concerned (25.8%), while 61-70 year olds claimed to be the least concerned (7%).
Where is the cost of living crisis?
The cost of living crisis spans the UK, but we found people living in different places have been affected in different ways. 17.6% of those living in North East England were worried about house prices, leading to that region being the most focused on saving for house deposits (12.8%).
Energy suppliers set different prices for each region, and we found those living in the East Midlands were the most concerned about energy prices. This concern might be what’s led to 78.4% of households reducing their energy use for financial reasons. Northern Ireland residents were the least likely to reduce their energy costs for financial reasons, while those living in South East England were the most likely to reduce costs for environmental reasons.
- 41% of those living in Yorkshire are most likely to save for a holiday
- 38% of Northern Ireland households expressed worries about fuel and electricity costs
- East Midland residents were most concerned about the cost of living crisis, with 29.4 saving for upcoming rises in energy costs
Last year’s data
We conducted similar research to this back in October 2022, where our findings painted a slightly different picture, with people more concerned about the UK’s financial future.
Hodge research
Breaking down the cost of living crisis
Spending habits
Toward the end of 2022, 75% of respondents claimed to be putting less money away, while over half admitted to dipping into their savings for everyday spending.
A third of our respondents claimed to worry about going into debt over Christmas, while only 17% said they were willing to take out a loan to prevent becoming overdrawn.
58% of 2022’s respondents were concerned about rising interest rates and loan repayments, with a further 58% planning to move their savings in order to get the best return.
Most impacted
Overall, 61% were concerned about the performance of the UKs economy. Those under 50 years were significantly more concerned than those over 50, and women were 11% more likely to be worried than men.
When it came to Christmas, 26% of men and 35% of women worried about falling into debt. Those under 50 years were most concerned, and even higher earners on salaries of £60-80k per year were concerned about falling into debt.
Regional differences
Almost 1/3 of those living in London were worried about house prices in 2022, with 22.5% of Londoners saving more for house deposits. North West England residents were more concerned about energy prices, however. That led to a huge 80% of those people being more likely to reduce their energy usage for financial reasons.
Cost of living FAQs
Visit your local Government website to find out about available financial support and any possible cost of living payments: www.gov.uk/cost-of-living
Beware of scams from fraudsters pretending to be from a Government agency or support scheme – visit our scams and fraud hub for more information on staying safe in the cost of living crisis.
Visit your local Government website to find out if you’re entitled to any financial support.
Our support hub has information and resources for those who need help with the cost of living, and you can visit our blog for the latest tips on budgeting, saving and more.
If you’re a Hodge customer and you’re struggling financially, we’re here to help. Find out more here.
There are lots of steps you can take to get through these tough financial times.
Consider reviewing your own finances and start to budgeting for the rising cost of living, you can also work toward saving on your energy bills or start saving for an emergency pot – visit our cost of living blogs page for our top tips on surviving the cost of living crisis.
If you’re a Hodge customer and you’re struggling financially, we’re here to help. Find out more here.
The cost of living in the UK is rising faster than people’s wages are, add in a strong demand for everyday goods and problems with supply chains, and it causes a cost of living crisis.
Inflation causes the price of things to rise over time. If the inflation rate goes up, so does the cost of every day items. Things like the rising cost of energy, the aftermath of the Covid pandemic, the war in Ukraine and the availability of every day goods are all influencing inflation at the moment.
The cost of living is derived from adding up the total costs of everyday essentials. This includes food, utilities, and entertainment. These costs are recorded by local governments in the hopes of tracking changes over time.
Unfortunately, there’s no real way of predicting how long the cost of living crisis will last.
The good news is that, over the past 12 months, the UK’s economy has started to recover from the downturn it witnessed in 2021-2022. As previously mentioned, inflation has been cut by more than half between 2022 and 2023, and employment rates are steadily growing.
All of this leads to the possibility that the cost of living crisis has already hit its peak, meaning that it’s likely to improve well into 2024 and beyond.