New Research Reveals Cost-of-living Crisis Starts Impacting Middle Britain

High-income households (£40k or more per year) are increasingly feeling a squeeze on their disposable income accelerate due to the cost-of-living crisis, according to research from Havas Media Group (HMG) UK.

Launched in April 2022 by MG UK’s insight team, the Cost-of-Living study is the second wave of research that looks into the impact of the cost-of-living crisis on British citizens and their opinions. While low- or middle-income households continue to report facing mounting financial pressures, high-income households have reported the biggest increase wave-on-wave in feeling less comfortable financially (+10 percentage points – hereafter, pp) than they did in April.

The second wave reveals the squeeze on incomes is leaving high-income households to report they’re increasingly struggling to afford grocery bills (+12pp), keep up with rent/mortgages (+9pp) and pay energy bills (+11pp). These concerns are driving consumers to expect that they’ll cut spending further, especially those in high-income households (+13pp). They’re also looking for ways to cut costs including saving money on fuel (+ 8pp) and lowering grocery spend (+11pp).

The bigger picture shows, unsurprisingly, that the economy is the key reason for their concerns – over a third (36%) of respondents view the UK economy as a top concern, an 8pp increase wave-on-wave. Nearly three-quarters of respondents (73%) have noticed big increases in the costs of goods and services since the first wave, up from just over half (55%). Wave-on-wave, the biggest increases in costs have been felt in groceries (47% v 63%), dining & eating out (23% v 34%) and petrol/fuel (67% v 82%).

The impact wave-on-wave is that consumers are increasingly likely to switch products, most prominently in food & drink (+5pp). However, high-income households have shown the biggest increase in likelihood to switch products overall wave-on-wave, particularly in computer and video games (+10pp), electrical products (+6 % points) and homeware & furniture (+8pp).

Using the Meaningful Brands framework, the study explored the cost-of-living’s impact on the relationship between people and brands across three core pillars: functional benefits (does the product or service deliver), personal benefits (how brands improve people’s lives) and collective benefits (what’s their role in society).

Overall, between the two waves, Brits’ have hardened their views across the three pillars. Collective benefits are the pillar to see the biggest increase wave-on-wave, with Brits expecting brands to be transparent and honest in their activities and communications up by 4pp. Meanwhile, the personal and functional benefits to see the biggest increases are ‘help me save money’ (+2pp) and offering fair pricing (+1pp).

Laura Bebbington, managing partner of insight, Havas Media Group UK, explains, “The Cost-of-Living crisis has intensified and become more far-reaching, with mid- and high-income households and all age groups feeling the pinch. With inflation and its impacts now well-established and a growing nervousness around spending and job losses, people are tightening their belts to the maximum as the dark clouds of recession loom once again. We can expect to see imminent energy price hikes and other financial pressures on the household purse increase the impact of the cost-of-living on consumers over the coming months.”

Tony Mattson, head of strategy, Havas Media Group UK, explains, “Our research shows the impact of the economic downturn has become a problem for society at large and sadly it shows no sign of abating. On the contrary, the situation is very likely to get worse. With markets constrained, now is truly the time for marketing to come to the fore. Contextual understanding will be critical, so that companies and their agencies can adapt to people’s changing needs, motivations, and triggers. That means clients and their agency partners being empathetic to the needs of the business, responsive to the dynamics of the category and innovative in shaping customer value. Resilience and adaptability will be critical for success.”