BoE decision a ‘blow for Gen Z spending’, says RSM UK

The economic impact of high interest rates is set to hit Gen Z spending for the next 12 months, “prolonging the challenge for retailers and hospitality businesses as discretionary spend gets squeezed”, according to accountancy firm RSM. A survey of 2,000 consumers conducted on behalf of RSM UK shows Gen Z are “increasingly concerned” about the economic climate, despite signs of hardship easing. The majority of Gen Z consumers are particularly concerned about the impact of high interest rates (84%) on their future spending, closely followed by the housing market at 82%. The pressure on Gen Z spending is acute, with almost a third (29%) stating that they don’t have any monthly income left after paying for essentials, and almost a quarter (22%) saying they only have up to 20% left at the end of the month – demonstrating the real squeeze on finances. However, when you compare this with the responses from all consumers, there has been a slight uptick from 47% feeling financially comfortable a year ago, to 49% in 2024. The news comes after the Bank of England (BoE) kept the rate unchanged at 5.25% for the seventh consecutive month. The bank’s MPC voted by a majority of 7–2 to maintain the rate, despite inflation hitting its target and falling to 2% in May. UK inflation hit its target for the first time in almost three years, as consumer price inflation eased to 2% in the year to May, down from a rise of 2.3% the prior month. The Bank of England last hit the 2% target in July 2021. According to the Office for National Statistics, the decline was largely thanks to falling food prices, with prices falling this year but rising a year ago. Robyn Duffy, senior analyst at RSM UK, said: “Today’s decision to hold interest rate at 5.25% is a blow to consumers and the housing market. Gen Z in particular are suffering on this front, with house purchases feeling further out of reach than ever, and the rental market seeing increasing competition as prospective tenants bid for accommodation in some parts of the country. This is all taking a hit on their willingness to spend.”