Struggles of Lower-Income Shoppers in UK Retail Market

By James Davey, Sarah Young and Andy Bruce

SOUTHAMPTON, England (Reuters) – Deb Taylor emerged empty-handed from her branch of budget fashion retailer Primark in Southampton, southern England, complaining that “even the cheap stuff’s not cheap anymore”.

The 63-year-old cleaner was echoed by Antonia Alden, a stay-at-home mum of three who was on a rare shopping trip looking for a birthday present. “Other than that, I don’t even bother going to the shops,” the 30-year-old said.

Both women are struggling to make ends meet after months of high inflation and soaring energy bills, embodying the drop in confidence and spending among lower-income shoppers shown in recent British surveys.

While the bottom fifth of households by income account for just a tenth of UK consumer spending, their reluctance or inability to spend poses challenges for a government that prioritizes growth, as well as political risks.

The Labour Party, elected last July, faces pressure from Nigel Farage’s right-wing Reform party, which appeals to those feeling left behind.

Financial stress is adverse for retailers dependent on less affluent customers, with brands like Primark, discounters Poundland and B&M, baker Greggs, and sportswear group JD Sports struggling during the crucial Christmas period.

Conversely, mid-market retailers such as Marks & Spencer and Next performed better.

“Clearly there is a huge disparity between the haves and have nots, and this seems to be worsening at the start of 2025,” stated Neil Bellamy, consumer insights director at market research firm GfK.

Dashed Hopes

Many corporate leaders had anticipated that Labour’s substantial election victory would stabilize Britain after 14 years of often tumultuous Conservative governance, highlighted by the Brexit process.

However, the first budget announcement in October featured a 25 billion-pound ($31 billion) tax increase on companies for public services investment, which left business executives stunned.

Although interest rates are gradually decreasing and inflation-adjusted earnings are rising at the fastest rate in over two decades, the job market has weakened, and the economy shows stagnation.

Retailers caution about price increases due to higher costs, with the Bank of England forecasting a return to overall inflation at 3.7% this year, leading employers to limit pay increases.

Britain has traditionally relied on its minimum wage to assist the lowest paid, which has risen by nearly 50% since before the COVID pandemic. Nevertheless, significant surges in energy and food prices have severely impacted the lowest paid.

Eoin Tonge, finance director of Primark parent Associated British Foods, remarked: “If anything, uncertainties remain for parts of society, especially regarding unemployment and part-time work.”

The monthly Income Tracker from supermarket group Asda and the Centre for Economics and Business Research highlights financial strains, revealing that the top and middle-income households enjoyed a 9.9% year-on-year growth in December, while the lowest-earning 20% experienced a 0.3% decrease, resulting in a weekly shortfall of 70 pounds.

GfK’s January survey showed an 11-point decline in confidence among households earning under 14,500 pounds annually, in contrast to a minor 4-point drop for those over 50,000 pounds.

Additionally, the Institute of Grocery Distribution found that 41% of shoppers earning below 21,000 pounds plan to reduce grocery spending, with over half expecting to dine out less in the upcoming months.

Concerns over job security have further escalated, with supermarket chains Tesco, Sainsbury’s, and Morrisons announcing a total of 3,600 job cuts recently.

John Jones, who operates the shop and online store Philip Morris and Sons in Hereford, faces a potential reduction of two staff members amidst a 100,000-pound increase in annual costs due to budget-related policy changes.

“When you’ve already got no growth, and probably no prospect of growth because the consumers aren’t feeling confident, that’s a lot of money to be finding,” he stated.

Outside Primark, Alden is preparing for a challenging year: “I don’t see it getting any better.”

($1 = 0.8047 pounds)