Recent data published by the Financial Conduct Authority (FCA) suggests that 7.8 million people across the UK are finding it increasingly more challenging to keep up with their household bills, a rise of around 2.5 million since 2020. The research shows that one in four UK adults are in financial difficulty or believe they could quickly find themselves in difficulty if an unexpected cash emergency popped up.
On top of this, the latest statistics from the Department for Work and Pensions (DWP), four million children now live in households where someone is claiming Universal Credit, half a million more than this time last year.
This, combined with the continued ripple effect of the Covid-19 pandemic, the war in Ukraine and the looming recession, plus multiple other financial factors, has resulted in us living in an era of poly-crises, said Dr Gordon Fletcher, Lecturer in Operations and Information Management, University of Salford Business School.
He explained that while the economy is predicted to worsen before we start to see signs of improvement, recent figures show an unexpected and stronger than initially forecast bounce-back in economic growth in October.
So, what does this mean? According to Dr Fletcher, the outlook for 2023 isn’t all doom and gloom with some longer term benefits to look forward to as we navigate the squeeze.
Cost of living predictions for the year ahead
Dr Fletcher shares his predictions for the next 12 months.
1. Consumers will seek alternate forms of shopping
Dr Fletcher explained: “As disposable incomes tighten further, consumers will seek alternate forms of shopping and we’re expecting to see a surge in purchasing more goods from charity shops.”
Not only are charity shops beneficial for households when money is tight, but they’re considerably better for the environment as they’re built on a foundation of recycling and reusing goods that are still in a functioning condition.
He continued: “We’ll really start to see the sentiment towards charity shops shift considerably too during these trying times we’ve found ourselves, with this once stigmatised form of shopping becoming fashionable again because it’s the right thing to do from both a spend reduction and sustainability standpoint.
“Independent charity stores can also add a contemporary feel to a high street. In the same way, there is a significant difference between a national chain retailer in contrast to an independent. For this reason, we’ll see independent charity stores enticing more consumers back to the high street and a potential resurgence of the once thriving British High Street.”
2. Britain’s entrepreneurial spirit will flourish
Despite what some might expect, during challenging economic times, people continue to launch new businesses.
Dr Fletcher said: “We’ve seen phrases like the ‘great resignation’ and ‘quiet quitting’ really sweep the nation over the last two years, as increasingly more people seek to give up the daily grind and do things differently - on their own terms.
“We’ll see the entrepreneurial spirit among Britons really accelerate, with a trend in people starting their own businesses from the comfort of their own home. After all, warming and lighting one building is better than paying for two.”
3. Consumers will consciously look to alternative energy sources
From solar power to heat pumps, Dr Fletcher predicts that we’ll see consumers bite the bullet and invest the upfront capital into renewable or more efficient energy sources.
While the large upfront cost has been a challenging obstacle many consumers have found difficult to overcome, the energy crisis has resulted in those who are in a financial position to do so, to re-think their stance on this investment as a result of the long-term benefits. Beyond considerable cost savings in the long run, the reduction in environmental impact is also significant.
Dr Fletcher added: “We’re also starting to see huge advances in alternative fuels, with alternate avenues for energy such as hydrogen generation expected to enter the mainstream market in the not-too-distant future.
“Community scale energy generation and producing energy locally to use locally is another possibility we could see the UK Government explore. Cost has traditionally been a big sticking point, however, as we continue on our road to net zero by 2050, eyes are really being opened to the possibility of this.”
4. Returning to the ‘Good Life’ with grow your own
As expected during times of crisis, the current economic climate has resulted in changing consumer behaviours when it comes to buying patterns. Shoppers spent less towards the end of last year, possibly as a result of increasing energy consumption and bills coupled with rising costs of everyday food items.
As a result of the continued upswing in prices for household staples, Dr Fletcher predicts we’ll see increasingly more people opt to grow their own fruit and vegetables.
From the windowsill to pop-up greenhouses, he number of home=growers is expected to increase this year.
5. Increased appeal of electric vehicles
Vehicle-to-grid (V2G) reverse charging is a potential unexpected benefit for Electric Vehicle (EV) homeowners, predicts Dr Fletcher.
He explained: “As this type of opportunity becomes available, we will see more consumers shift to EV as the environmental benefits and technology continue to improve.
“V2G is significantly better for the environment than fossil fuel cars and allows EV owners to make considerable savings. It can also enable them to power their home and could even generate an income by selling excess energy back to the grid.”
He said that this return on investment is making it incredibly desirable to consumers during the ongoing cost of living crisis, however, while the upfront investment is sizable, the long-term benefits are increasing.
Dr Fletcher added: “With the need to create storage in the grid to even out the peaks in demand, there are promising developments around large-scale non-metallic batteries.
“This includes sand batteries (currently useful primarily for heating) or gravity batteries, which are essentially large weights lifted up a mine shaft when excess energy is available and released back down, returning almost all the stored energy back to the grid during times of peak demand.”
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