Significantly more UK households say they are spending more on essential products and services than they were a year ago, according to the latest Lloyds Bank Spending Power Report. The report has also found that significantly more consumers say they have increased their spending on essentials compared to 12 months ago with 70% of adults feeling negative about current levels of inflation.

In the monthly Ipsos MORI survey of over 2,000 bank account holders in the UK, 55% of people said that they spent more on household groceries compared to this time last year, a rise of 17 percentage points on December 2016. Gas and electricity are also a growing burden on households with a 14pp rise in the proportion of consumers (48%) saying the amount they are spending on energy bills has increased compared with 12 months ago (34%). 43% of people said they were spending more on petrol and diesel, a rise of 2pp in the last month alone.

Overall, inflation continues to be a major concern for the public. Whereas almost half (49%) of those surveyed in December 2016 felt positive about current levels of inflation, a year later 70% are feeling negative about it. Furthermore, those not yet on the housing ladder are even more likely to be pessimistic with three quarters of people who rent (75%) having a negative outlook.

The turn of the year is a time when people typically look at ways to reduce their outgoings and better manage their finances after the expense of the Christmas period. The squeeze on spending and fears about inflation may explain why almost a third of adults (30%) claimed that they intend to improve their finances in 2018. Roughly half of 25-34 year-olds said they plan to improve their physical health and wellbeing (52%) or finances (47%), which is significantly higher than the proportion of over 65s for the same commitments (28% and 10% respectively). Four-fifths (79%) of those who plan to improve their finances aim to cut back on spending with women significantly more likely than men to think they would do so (82% vs. 75%).

Robin Bulloch, Managing Director of Lloyds Bank, said “This is typically the time of the year when many of us plan to make a fresh start and improve our health and well-being. Almost a third (30%) of people say they intend to improve their financial health in 2018 which is encouraging at a time when the pressures on consumer spending are increasing. This is the perfect opportunity to review your budget and to consider how you can make your money go further.”

“It is clear that some consumers are already looking to improve their financial situation. The proportion of those surveyed claiming that they will pay off more debt in six months’ time than they do now (21%) has increased significantly since November (+4pp). This could be due to expectations of a further Bank of England interest rate rise.”

“However, others are already beginning to feel the pinch. This month’s survey indicates there has been a significant decrease (down 7pp to 70%) in the proportion of consumers who plan to save more in six months’ time. Families with kids are feeling the pressure more than most. Not only has there been a 7pp fall in those who plan to save more, but also 45% expect to have to spend more in six months’ time, an increase of 11pp since November. This differs from the average across all respondents, where only 37% plan to spend more in six months’ time.”

Meanwhile, Lloyds Bank’s analysis of its own customer account data showed that people continue to spend more on essentials. The year-on-year growth in consumers’ essential spending for December was around 2.5%. Food, accounting for c.40% of all essential spend, had a year-on-year rise of just under 2% and fuel spend rose by just under 5%. Gas and electricity spend rose to over 3%, the fifth consecutive month of spending increase, following over three years of continuous decline.