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Cost of living Crisis

Updated: May 26, 2023

Not since World War two has the global economy felt the effects of such total market disruption as were experienced during the Covid pandemic. Humanity’s inability to go about its daily business led to major supply shortages and the demand for consumer goods and materials to sky rocket.

As supermarket shelves became alarmingly bare, fear drove demand for everyday items and commodity prices inevitably rose. Restrictions on people’s ability to work meant that some households weren’t receiving the normal level of income to meet their essential living costs.

Like a ‘punch drunk’ boxer the countries of the world were beginning to slowly recover from these constraints only to be sent reeling again by Russia’s military conflict with Ukraine. Not only has the world witnessed the shocking humanitarian implications of such action, but for many, the impact of fractured worldly supply chains has been just as devastating on their everyday lives.

As major contributors to the worlds grain (Wheat 30%), oils (Sunflower 50%) and fuels (Russia – Gas 50%) the disruption of these supplies has compounded the economic effects of the pandemic forcing inflation to rise worldwide.

Inflation, in simple terms, is the rise of prices over a given period of time. The UK experienced a 41 year high (11.1%) in October 2022 according to the House of commons Library. UK homeowners have witnessed food bills rising, household energy bills soring and the cost to fill up their car increase by over 20p per litre in the last year. The inability of household incomes to match the rises in inflation has led to a Cost-of-living crisis.

A recent survey by KPMG illustrated how consumers are trying to manage their situations.

  • 61% of consumers plan to cut discretionary spend in 2023.

  • Only 4% of consumers said they will be able to increase their spending in 2023.

  • 43% of consumers with savings are using them to help meet essential costs.

  • Average savings balance of consumers polled is £7371, with London the region with the lowest savings average, at £4725.

  • Eating Out is the most common cost-cutting target.

  • A third of consumers plan to buy more own brand & value produce in 2023, whilst a third will buy fewer items.

“Savings are now being used to help meet essential costs by nearly half of the consumers we surveyed, which provides a cushion, but these savings are finite and so the longer the current economic environment continues the more worrying it becomes.” Linda Ellett Partner KPMG 29 Dec 2022

Wealthier households are more likely to be able to absorb higher energy costs by choosing to redirect some of their monthly savings to cover amenities. Lower income households are unlikely to have the same luxury as paying their energy bills accounts for a greater percentage of their monthly budget than richer households (Institute of Fiscal Studies).

The Institute of Customer Service is clear however that ‘trust holds the key to maintaining customer spending throughout the cost-of-living crisis. 64% of customers would be willing to spend a little more with a company that they trust and 95% of those would are likely/ very likely to use them again.

KPMG’s research led Linda Ellet to state that;

“Ability and appetite to spend on big ticket items is limited in this climate, but spending plans do remain for holidays, home improvements and appliances.”

Spending on home improvements has become a daunting task with all the negative press about rogue traders and cowboy builders. However, Kiistone’s online app staged payment process protects both the customer’s money and the time and materials invested in a project by a tradesperson.

Bottom line is that a transparent payment process that benefits everyone and builds trust can do a great deal towards reassuring the public that spending on high value items can be rewarding rather than risky.

New businesses that are trying to promote themselves in these uncertain times must cement that element of trust with their buyers to gain positive reviews. Established companies for their security or continued growth, must maintain and strengthen their supply chains and sales. Opportunities to gain a competitive advantage, especially when consumer confidence is low, can turn a negative situation into the one that turns them into a market leader.

We all must adapt when times are difficult. For the public it is to carefully control their spending. For businesses it is to allocate their spending in the most efficient way possible to maximise revenues.

Kiistone aims to have a positive impact on the cost-of-living crisis by giving consumers the confidence to spend and businesses the peace of mind to grow knowing that their cashflow is protected.



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