In Southampton, England, shoppers like Deb Taylor and Antonia Alden are feeling the pressure of rising prices. Taylor, a 63-year-old cleaner, left a Primark store empty-handed, remarking that even budget fashion is no longer affordable. Alden, a stay-at-home mother of three, rarely shops outside of essential purchases. Their struggles reflect a broader trend in the UK, where inflation and soaring energy bills have tightened household budgets, especially for lower-income consumers.
While the lowest 20% of earners contribute just 10% to overall consumer spending, their financial struggles pose a challenge for the government, which has prioritized economic growth. The Labour Party, elected in July, faces political pressure as right-wing opponents gain traction among those feeling left behind.
Retailers catering to budget-conscious shoppers, such as Primark, Poundland, B&M, Greggs, and JD Sports, have reported weaker sales, especially during the critical Christmas season. In contrast, mid-market retailers like Marks & Spencer and Next have performed better, highlighting a growing divide between affluent and struggling consumers.
Economic uncertainty remains high despite rising wages and declining interest rates. Labour’s recent budget introduced a £25 billion tax hike on businesses to support public services, causing concern among employers. The Bank of England expects inflation to rise to 3.7% this year, while retailers warn that increased costs will lead to further price hikes. The UK’s minimum wage has increased by nearly 50% since before the pandemic, but soaring energy and food prices continue to hit low-income households hardest.
According to Asda and the Centre for Economics and Business Research, disposable income for the wealthiest households grew 9.9% in December, reaching £894 per week, while middle-income households saw an 18.6% increase. However, the lowest earners experienced a decline of 0.3%, leaving them with a £70 weekly shortfall. Consumer confidence has plummeted among those earning under £14,500 annually, with GfK’s confidence index falling 11 points in January. Meanwhile, higher-income households saw only a minor decline.
Grocery spending is also expected to tighten, with 41% of low-income shoppers planning to cut back. The recent wave of job cuts from Tesco, Sainsbury’s, and Morrisons, totaling 3,600 positions, has further fueled uncertainty.
Retailers are also feeling the strain. John Jones, who operates Philip Morris and Sons in Hereford, faces a £100,000 annual cost increase due to policy changes and is considering staff reductions. With economic growth stagnant and consumer confidence low, many businesses are bracing for further challenges. Outside Primark, Alden summed up the outlook for many: “I don’t see it getting any better.”
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