Comment: ONS inflation rate

Following the latest ONS data on the rate of inflation, Personal Finance Expert, Laura Howard of Forbes Advisor, says: “The annual rate of inflation may have edged down in August to 9.9% from the 10.1% recorded by the ONS in July, but this will be cold comfort to the millions of Britons in the thick of a cost of living crisis.

“Laid bare, the figure still means that everyday costs are now significantly higher now than they were a year ago. And it’s a far cry from the ‘healthy’ target rate of inflation set by the Government of 2%.

“Prices of grocery staples such as eggs, milk and bread have risen at a rapid rate. A pint of milk in August cost an average 62p according to the latest available ONS data, compared to 43p the same month the year before. So it’s little wonder that in recent research we carried out at Forbes Advisor, almost half (47%) of British consumers are buying cheaper branded products, while more than a third (34%) have turned to supermarket-own brands.

“While Liz Truss’ Energy Price Guarantee delivered to the House of Commons last week has ‘tamed’ energy prices to £2,500 a year – not including the previously-announced £400 discount that will automatically be applied to electricity bills from autumn – costs are still astronomically high, and for millions of UK households, simply unaffordable.

“Our research showed that more than a quarter (28%) of credit card users are paying with their card more frequently, while a further 28% say they are now struggling to keep up with monthly repayments. It also revealed that two-thirds (68%) of Brits have considered additional ways to boost their income, such as selling used items or even getting a second job.

“If you are struggling to pay your energy or any other household bill, contact the supplier. It has a duty of care to listen and offer a workable solution, while your power remains ‘on’ regardless.

“If you are struggling with credit card repayments, again contact the lender to agree a manageable repayment plan. Missing payments will negatively impact your credit record, storing up even greater problems for the future.

“If you are worried about debt, a debt charity such as StepChange is free and impartial. Never pay for advice around debt and never share details with companies contacting you by email or phone. Sadly, even debt advice is a target for scammers.”

Additionally, Forbes Advisor has today released new insights on how consumers are adjusting their spending habits, in line with rising inflation.

1. Brits are tightening their wallets in line with rising food prices

Overall, just under nine in ten Brits (89%) have changed up their spending habits when shopping for groceries. Research from Forbes Advisor shows that almost half (47%) are buying cheaper branded products to save on their rising grocery bills while more than a third (34%) have turned to supermarket own brands.

Consumers are reducing how many groceries they buy. Overall, more than one quarter (27%) are buying less food as a result of increasing food prices and one in four (27%) have reduced their weekly shopping budget.

2. People are driving less to save on rising transportation costs

Two in five (42%) are reducing the frequency of non-essential journeys to save money on transportation costs, while one third (33%) are cutting back on the number of long journeys.

Some people have changed how they get around, with over a third (35%) walking more frequently to reduce fuel and transportation costs. Rising pump prices mean some motorists are struggling to afford the cost of filling up their tank in one go. As a result, almost one quarter are putting less fuel in their cars when they visit the petrol station (24%).

3. People are cooking more often and planning meals with cost in mind

Almost a third (31%) have cut down on takeaways and are opting for more home-cooked meals. And when it comes to cooking, one in four are cooking with more basic ingredients, instead of pre-prepared options (25%) while almost a third (31%) are planning meals to avoid wasting food.

Looking at other money-saving efforts, one third (31%) are using leftovers to avoid food waste and a quarter (25%) are batch-cooking more regularly.

Following the increase in spending on subscription food boxes during Covid lockdowns the situation has reversed, with one in five (20%) no longer using services such as Mindful Chef and HelloFresh.

4. Brits are making clothes last longer and searching for bargains

Two fifths (42%) of Brits are wearing old clothes for longer than they would have done previously to avoid spending money on the latest fashion. A third (33%) of Brits are primarily buying sale or discounted clothes. Within this figure, one third (30%) are turning to charity shops or second hand markets more than ever before.

Almost one in four are cutting down on designer clothes and accessories (26%). Worryingly on an environmental level because of the waste created, more than one in five (23%) are turning to ‘fast fashion’ clothing, due to cheaper prices.

5. Dining out is less common

Overall, 84% of Brits have changed their spending habits when it comes to dining out. The survey found that more than two fifths (44%) of people are choosing to dine out less frequently, because  of higher prices. A quarter of Brits (24%) are dining at more affordable restaurants and choosing cheaper items on the menu.

Sadly, it is the restaurant staff who are really missing out. One in five are tipping less money to restaurant staff, to save where they can (20%).

6. Leisure spend has been cut, along with date nights and social plans

One third (34%) of respondents said they are engaging in fewer leisure activities such as gigs, festivals and the cinema. This has resulted in people spending less time with their friends, as three in 10 (30%) are making fewer social plans and a quarter (27%) are socialising with friends at home more regularly.

Furthermore, rising everyday costs are causing couples to spend less money on quality time together. One in four (25%) couples are going on fewer date nights to save money, and more than one in five (22%) people are opting for dates that cost less. Additionally, a further fifth (18%) of people are dating less often.

7. Being savvy with everyday spending

Consumers are making an effort to be savvy when it comes to their everyday spending. One third (32%) have started using coupons or vouchers more regularly as a means to save money . Similarly, more than one quarter (28%) have swapped their usual products for alternatives where they can get a similar product using a discount.

Overall, a quarter (27%) have cancelled a paid music streaming subscription service and a similar number (26%) have cancelled a TV or film streaming service to save money.

8. Changing up credit card habits

More than three quarters (78%) of credit card users have adjusted their spending habits as a direct result of the cost of living crisis. More than a quarter (28%) use their credit card more frequently, while a further quarter 28% say they are now struggling to keep up with monthly repayments. However, more than one-in-six (17%) claim they are being ‘more careful’ with their credit card, using it less than they were previously.

Methodology: This online survey of 2,000 UK adults was commissioned by Forbes Advisor U.K. and conducted by market research company OnePoll, in accordance with the Market Research Society’s code of conduct. Data was collected September 6 – 8 2022.