UK retailers are facing continued pressure from cash-strapped shoppers as new data shows lower-income households are cutting discretionary spend, switching supermarkets and buying more own-label groceries to make ends meet.

The latest Vanquis Financial Wellbeing Index found that one in three workers earning under £40,000 have created additional income streams, as rising household bills continue to erode disposable income.

The report found that households are saving less than £3 in every £100 earned, while 29 per cent said they had saved nothing over the past six months.

Unexpected costs are also eating into household budgets, with groceries named by 25 per cent of respondents as one of the most common triggers for wiping out savings, followed by car repairs at 19 per cent and utility bills at 17 per cent.

For retailers, the findings underline the ongoing polarisation in consumer spending, with shoppers remaining highly selective and focused on value even as some areas of discretionary spend begin to stabilise.

Vanquis found that 77 per cent of households earning under £40,000 are cutting back on non-essential spending, while 64 per cent are buying more own-label grocery products and 60 per cent are switching to cheaper supermarkets.

The shift suggests that grocers will remain under pressure to defend value perception, particularly as lower-income shoppers continue to trade down or shop around for cheaper alternatives.

The report also highlights the impact of rising essential costs on consumer confidence. Spending data showed water bills had risen 30 per cent over the past year, while rent and mortgage costs were up nine per cent and council tax had increased seven per cent.

Despite the pressure, there were some signs of stabilisation. Income for households earning under £40,000 grew nine per cent over the last quarter, while spending on entertainment and leisure rose seven per cent year on year. Travel and holiday spending increased four per cent, while fitness spend was up six per cent.

However, Vanquis said financial resilience remained fragile, with 42 per cent of people in households earning under £40,000 saying their financial situation was affecting their mental wellbeing. A further 30 per cent said it was affecting their physical health.

Around two thirds said the cost-of-living crisis was “not getting any better”.

Vanquis Bank chief executive Ian McLaughlin said the data showed households were “doing everything right” by finding extra income, cutting back and managing their money carefully, but rising essential costs were continuing to erode financial headroom.

He added: “While there are encouraging signs that spending is beginning to stabilise, the bigger challenge remains converting short-term resilience into long-term financial security.

“Too many households are finishing the month with little or nothing left to save. Without that buffer, financial confidence remains fragile.”

The Vanquis Financial Wellbeing Index draws on anonymised transaction-level spending data from money management app Snoop, alongside consumer research from Mintel.

The survey was conducted between 27 April and 13 May 2026 among 2,000 people in Great Britain.