Housing and utility bills projected to account for over a quarter of total consumer spending
Changing shopping habits will impact the future role and design of stores and retail spaces
According to PwC’s latest UK Economic Outlook report, spending on housing and utility bills has seen a strong increase from around 13% of total household spending in 1963 to around 22% in 2009, and is expected to rise further to over 25% by 2030 as a result of rising relative prices and an ageing population.
Other categories that the report highlights will see their share of total consumer spending rise significantly over the next two decades are ‘superior goods’ such as recreation, restaurants and hotels, health and education for which demand rises more than proportionately as real incomes increase. Furthermore, the PwC model projects that an ageing population will push up spending on health and leisure activities in particular.
Conversely, the share of spending on many ‘essential goods’ is expected to continue to fall over time as income levels rise. Food, for example, is expected to be down to around 6% of total household spending by 2030, but the decrease is not predicted to be as rapid as in previous decades since food prices are expected to rise more strongly in future than in past decades. Alcohol and tobacco, clothing and footwear will also see declines in their spending shares due to shifts in consumer tastes, large excise duty rises and lower relative prices, driven in particular by cheap imports in the case of clothing (although this downward trend will probably also be less marked in future than in past decades).
John Hawksworth, chief economist at PwC, said: “The report shows that there have been some noticeable changes in the pattern of UK consumer spending since the early 1960s. Looking forward, consumer spending is projected to grow by only around 1% in 2011 and around 1.7% in 2012, lagging behind overall GDP growth. This reflects the squeeze on household spending power from continuing credit constraints, rising energy, petrol and food prices and tax increases. Subdued house prices and the dampening effect of public sector job cuts and high household debt levels are also likely to restrict the pace of consumer spending growth for some years to come.”
In the longer term, the PwC report projects average real consumer spending growth of around 2% per annum over the next two decades, significantly lower than average growth rates of just over 3% in the 15 years to 2007.
Mark Hudson, UK retail and consumer leader added: “The continuation of the observed trends in what we buy and the further move of shopping behaviour to online – which is now heading towards 10% of retail sales – are the underlying drivers behind the long-term structural shift in how and where we shop and the nature and role of the high street.
“Now that internet shopping is mainstream, but still growing in excess of 20% per year, people are changing the way they shop. This includes the type and frequency of shopping trips as well as the process itself; how they browse, transact and collect their goods.
“These trends all point to different roles for stores in the future, with different requirements according to the nature of the shopping trip. For example easy accessibility for click and collect, large stores for showing off ranges and enabling trial, exciting show stores for brand building, and commuter route small stores for top-up or treat shopping.
“Concurrently, as spending shifts further towards leisure, recreational or more indulgent activities, new uses for existing space will develop e.g. witness the development of coffee shops and nail bars over the last 20 years.
“As the pace of change accelerates, greater flexibility to continually alter and adapt business models to meet consumer needs more precisely, will be increasingly critical.”
