Cost of living: an uncertain future for consumers

Headlines

• Consumer worry over the cost of living crisis and the price rises associated with this are more front of mind than other consumer issues such as sustainability.
•  Consumers fear the worst is yet to come with nearly six in ten already having to make adjustments to cover essential spending.

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Cost of living crisis is hitting consumers hard

The latest update of our Which? Consumer Insight panel finds that consumers are starting to feel the pinch of the cost of living crisis, with many seeing price rises whilst their incomes remain static. People have observed these price increases in various sectors, with three-quarters of consumers (75%) reporting having been recently affected by increased food prices and seven in ten (72%) experiencing them within the energy sector in May 2022. These findings from the Which? Consumer Insight Tracker are also supported by our W? Consumer Insight Panel with participants experiencing increases in broadband, mobile, trade services, council tax and mortgages.

 "One of these small little cars, it used to be £20 or £25 I used to fill the tank on it. Now it’s like double, you know, it’s like £40 odd to fill it. It’s ridiculous… The increase is horrendous."

Rising prices overshadow other consumer issues

Even those who have not yet been affected by the rises are worried. In the Which? Consumer Insight Panel food prices are a particular worry, almost as much as energy price rises. Other consumer issues such as sustainability, housing safety issues and product safety received lower levels of concern.

" The thing is, with buying sustainably, the only reason I didn't put that higher up was because it doesn't matter. If you go there and buy organic chicken, it’s pretty much just the same as buying non-organic chicken. It’s just a label."

"Yes, I think energy prices were already too high before the price cap was raised. It sounds as if, in a couple of months’ time, it is just going to spiral out of control, so  I am really, really, really concerned about that."

Many of the price concerns seen within our panel are due to uncertainty about further price hikes including those within the energy sector. In addition, people expect to see continued rises in interest rates affecting mortgage repayments and other bills such as council tax.

"I think food will continue to rise, I really do and utilities too and probably housing. Like I said, I’m due to get a rent increase in April so it will be interesting to see what that is. Again, council tax as well. I imagine they will go up. Well they always do. They never go down, do they? I am a little bit concerned about those type of things."

"When is it [energy price rises] going to end? Is it going to come down in spring and summer? But then go back up again in autumn and winter?" Because it looks like this energy thing, according to even Snoop or Martin Lewis, it isn't going to end any time soon."

The worst is yet to come

There are concerns felt by most households - even those who are yet to be impacted by rises in bills - that the worst is yet to come, with many expressing a feeling of uncertainty around the energy price cap. Fixed energy tariffs continue to provide some households with protection, but these consumers are often concerned about what will happen when these tariffs end. This uncertainty makes it difficult for consumers to budget and plan for the future as they struggle to predict just how high prices will go.

"I feel uncertain, apprehensive.  I don't really know how much things will go up, like national insurance, gas and electric. The total impact might be huge at the end. We're quite good at keeping track but we're a bit in the dark."

"You can plan for the expected but it's really hard for me to set aside money for more than this as everything else is paying back my creditors.  It's hard to have a buffer when you are on a repayment plan."

This is concerning as consumers are already having to make financial adjustments, including cutting back, dipping into savings or borrowing.  

"I'm sitting here freezing, with the oven on a little bit, a blanket over me just so I don't have the heating. I'm wearing mittens (...) and I'm wearing three layers of clothes, and everything, and I'm still freezing. So, that's the worry. I mean, I've been looking at energy bills, is it going to get better?"

More needs to be done to support consumers as the ‘at risk’ group is set to grow.

As the cost of living crisis continues there are an increased number of households losing their financial resilience. Our Which? consumer insight tracker shows a smaller but increasing proportion of consumers are under more severe financial pressure, with 7.1% of consumers saying that their household had missed a housing, bill, credit or loan payment in the last month in May. Within our panel two of our 35 households are in our ‘at risk group’ where they are experiencing significant financial pressure, with a third (12 households) in our ‘tipping group’ meaning their financial buffer is decreasing putting them at potential future financial risk. As household finances continue to be put under pressure there are concerns this ‘tipping group’ will grow and support is needed to ensure the most at risk are protected.