- 40% of UK consumers expect no improvement in their personal finances in 2024
- Three quarters (74%) have made lifestyle cutbacks in 2023 to tackle inflation and rising interest rates
- Most common cutbacks include using less energy, cutting spending on personal goods, going out less and reducing supermarket spend
- 55% have made adjustments to their work or finances, like using cash savings and generating additional income from working extra hours or online selling
- 22% said they expect to have to retire later because of inflation and higher interest rates
- Only one in five (21%) expect interest rates to have fallen by the end of 2024
Data based on a nationally representative survey of 2,000 UK adults carried out online by Opinium on behalf of AJ Bell in December 2023.
Laith Khalaf, head of investment analysis, AJ Bell:
“Consumers aren’t banking on a miraculous boost to their personal finances in 2024, with four in ten expecting no improvement from a pretty grim 2023, according to an AJ Bell and Opinium survey of 2,000 UK adults. Two years on from the first rate hike from the Bank of England, Brits are also digging in for the long haul on interest rates. While markets are getting very excited about the prospect of rate cuts in the coming year, consumers aren’t buying it, with only one in five expecting interest rates to have fallen by this time next year. They aren’t alone in this prognosis; the CBI has also said it thinks it will be 2026 before the Bank of England cuts rates. Clearly the longer monetary policy remains tight, the more pressure is piled on UK businesses and consumers.
“Our survey also highlights some of the changes people have made in 2023 to adapt to the cost of living crisis. Almost three quarters have made lifestyle cutbacks in response to higher inflation and interest rates. 40% have dialled down their gas and electric consumption, 27% have cut back on holidays, 25% have switched to a cheaper supermarket and 17% have cancelled subscriptions such as streaming or gym memberships. Clearly there’s a lot of belt-tightening and trading down going on, which has a knock-on effect on the UK economy. UK growth projections for 2024 are pretty anaemic, and there has to be a wide margin for forecast error given the exceptional change in the interest rate environment.
“There have been widespread adjustments to working patterns and financial holdings too. A quarter of consumers have dipped into cash savings, 12% have worked longer hours, and one in ten have taken on more debt. A relatively small proportion of individuals have sold investments or cut pension contributions, given the magnitude of the crisis that has engulfed consumer finances. Only 5% have sold investments, and when compared to the 25% who have dipped into cash savings, this suggests consumers are rightly holding on to their investments for the long term where possible, though this figure is probably also reflective of the fact that fewer people hold investments compared to cash accounts. In pensions, only 4% have cut back on contributions, no doubt because reducing payments also means giving up tax relief and, in many cases, employer contributions too. However, just over one in five now expect to retire later as a result of the current economic situation.
“Inflation is now falling away and it’s widely thought that interest rates have peaked, but it’s unlikely we’ve hit rock bottom for consumer finances. That’s because while inflation is cooling, it’s still building on previous double-digit levels. The good news is wages are still growing, but those extra pennies are also being eaten by bigger mortgage payments and higher taxes. We’re only part of the way through the real effects of the huge repricing in mortgage rates, and the popularity of fixed rates in the last few years means we can expect considerable pain from higher housing costs in 2024 and beyond. Meanwhile, over the next five years the tax burden is forecast to rise to its highest level since the Second World War. With income tax and other thresholds frozen, or in some cases cut, the taxman is going to be a ravenous extra mouth to feed for consumers.”
Survey responses in full
The following data comes from a nationally representative survey of 2,000 UK adults carried out online by Opinium on behalf of AJ Bell in December 2023.
