(Bloomberg) — Britons are indulging in small mood boosters as they brace for a tough budget next month. Consumers spent 7% more on high-end perfumes in August than a year earlier, shunning cheaper alternatives, according to an analysis of online shopping data by Adobe Digital Insights. When it came to staples such as appliances and clothing, they bought more of the cheapest items.
It illustrates the “lipstick effect” coined in 2001 by Estée Lauder heir Leonard Lauder to describe how consumers resort to affordable luxuries to lift their mood in uncertain economic times. It was seen last year when Britain was in recession. This time it comes amid warnings from the new Labour government about the decisions that need to be taken to fix the public finances.
Prime Minister Keir Starmer’s hints of pain to come in the Oct. 30 budget have spooked consumers who were enjoying rising real incomes and the first Bank of England interest-rate cut since the pandemic. Confidence plunged the most in two-and-a-half years this month.
Labour has tried to soften its message in recent days amid concerns it was undercutting its own growth ambitions. “Households are wary of potential tax hikes,” said Nicholas Found, senior consultant at Retail Economics. “Retailers with a balanced premium and mass-market offering are tapping into a shift to affordable luxuries.
” The average household spent around £1,534 ($2,050) in September on bills and outgoings, a 2.4% real-terms increase compar.
