If you’re worried about the soaring cost of everything, this month offered a glimmer of light amidst an ever-darkening economic outlook. Grocery price inflation hit single digits for the first time this year. A report by Kantar found that after 16 months of double-digit growth, the rate is now hovering at 9.7%. Anyone hoping for a decline in food bills shouldn’t celebrate just yet. Grocery prices are still rising, they’re just not going up as quickly as before.
You are what you eat. For those in the business of understanding consumers and society, this adage has always been helpful. If you want to check the cultural temperature, gauge prosperity or get an idea of how we’re faring, food is a good place to start. The obvious story to draw from Kantar’s research is that personal finances are straightened. But probing deeper provides a more nuanced look at the UK. Specifically, the runaway success of supermarkets at the low end of the market shows that more affluent people are trading down. And the cost-of-living crisis is placing a yoke on middle earners.
Low market – high growth
The downturn has meant high times for discount retailers. Aldi appears to be making the best of the bonanza, with the German supermarket about to embark on a huge expansion plan, investing £1.4bn into new stores in the UK over the next two years. The UK arm of Lidl, meanwhile, has reported a heavy loss after investing in itself and spending more to keep prices low for customers. It lost £75.9m over the year to 28 February, while the previous year it made a profit of £41.1m. Lidl and Aldi together account for a huge slice of the grocery market in the UK – Kantar puts it as high as 17.7% of the whole sector.
Meanwhile, purchasing decisions in-store tell a story too (and not a very uplifting one). A poll by the BBC found that 28% of consumers reported eating less healthily due to the rising cost of food. As well as abandoning healthy diets, people are economising, with 19% admitting to eating more ready meals and processed foods, 17% are cooking less frequently from scratch, and 16% have cut back on organic food. Financial and physical health have a direct link, it seems. The boom in low-end groceries signifies an unsettling fact about middle-earners. That is, more will be doing well on paper, but feeling the pinch in real life.
Squeezed (lower) middle
Britain isn’t technically in a recession. But the ongoing scenario of surging costs and wage stagnation makes this fact hard to believe. At the start of the year The National Institute of Economic and Social Research (NIESR) predicted that middle-income consumers would be almost £4,000 worse off in 2023 compared with the year before. The shift to budget shopping substantiates the fact of the struggling middle. So too do figures to do with homeownership. Only the cheapest 10% of homes in England are affordable to the country’s middle classes, according to data from the Office for National Statistics. All this is creating a sub-sector of the middle class – one for whom the trappings of a prosperous life feel curiously out of reach, even as they achieve success in their careers and take steps to be thrifty.
As the squeezed middle struggles on, many will be watching the news for signs that an easier time is coming down the pipe. Food price increases slowing won’t have anyone dancing in the street, but the news is significant. Whilst recovering from a cost of living crisis won’t be a piece of cake, the Autumn Statement gave new hope that promises of a growing economy may bear fruit.
The world will turn, but – for the squeezed middle – it’s feeling like a watched pot never boils.
