Staying in is increasingly becoming the preferred choice for many Britons as they tighten their belts ahead of anticipated tax rises in the upcoming Budget. The growing trend of “cocooning” at home is driving a surge in demand for premium ready meals, offering a cost-effective alternative to dining out, which has seen restaurant bills soar following last year’s tax changes. These include higher employer National Insurance Contributions and other fiscal pressures, which have pushed up the cost of eating out.

Restaurants are feeling the pinch, but supermarkets are capitalising on the shift. The market for premium ready meals, often marketed under the guise of “private label” rather than the more prosaic “ready meals,” is valued at approximately £7.4 billion annually. Marks & Spencer leads this segment, employing Michelin-starred chef Tom Kerridge to elevate its Gastropub range, which features gourmet dishes such as chocolate cookie dough desserts. Alex Freudmann, M&S managing director of food, emphasises the company’s commitment to quality and continuous recipe refinement.

This premium ready meal trend is not confined to M&S. Sainsbury’s offers products like its £7 chicken, leek, and smoked ham hock pie, while discount chains Aldi and Lidl aggressively promote their own premium ranges, Specially Selected and Deluxe respectively. Giles Hurley, UK head of Aldi, explains that while inflation remains stubborn, more shoppers are opting for high-quality home dining experiences as a way to treat themselves without the expense of going out. Tesco is also aggressively growing its Finest range, which includes meals priced around £15, catering to those seeking a restaurant-quality experience at home. Profit margins in grocery are tight, but premium products typically command higher profitability, motivating retailers to expand their offerings.

This shift towards home dining is even influencing how people furnish their homes. Nick Wilkinson, outgoing chief executive of Dunelm, noted increased consumer interest in enhancing outdoor dining areas over the summer, coinciding with the cocooning trend. With tougher taxes looming, Dunelm plans to cater to this demand by offering more stylish dining furniture, reflecting a broader consumer desire to invest in enjoyable home environments.

The approach of the festive season has further amplified these trends. Marks & Spencer reported an 8% increase in festive food orders compared to the previous year shortly after launching its seasonal campaign, with over 56,000 orders placed in a single day. The retailer also sees growing demand for Christmas decorations, with sales up 67% year-on-year, highlighting consumers’ eagerness to create a joyful and indulgent atmosphere at home. Similarly, John Lewis reports a 145% increase in bauble sales, with retro styles particularly popular as shoppers look to cocoon and disconnect from external stresses.

However, these consumer behaviour changes are set against a backdrop of significant challenges for the hospitality industry, which continues to struggle with escalating costs. Business rates for pubs and restaurants could quadruple following the end of temporary relief schemes, threatening closures and undermining recovery efforts. Industry leaders have called on the Chancellor to introduce permanent reforms to alleviate this burden, warning of severe consequences if addressed too late or insufficiently.

In addition to rising business rates, hospitality firms face a “double whammy” of increased wage costs, exerting further pressure on their financial viability. Although the Government has offered a 40% discount on business rates, many in the sector argue that this is inadequate in the face of cumulative cost pressures. Calls have been made for urgent and sustained support measures, including maintaining reduced VAT rates for hospitality. An increase of the VAT rate back to 20% could prove devastating for an industry still grappling with inflated energy costs and subdued consumer spending.

Retailers, meanwhile, are also raising alarms about rising business rates, with forecasts indicating a £2.5 billion increase that could negatively impact prices and lead to store closures. Major names like Marks & Spencer and Sainsbury’s have urged the Chancellor for targeted intervention to avert these outcomes and protect both consumers and the high street.

In this complex economic environment, many consumers appear to be adjusting their spending habits by prioritising home-based luxury and dining experiences. While hospitality struggles under fiscal pressures, supermarkets and home retailers seize opportunities presented by these changing preferences, creating a dynamic landscape where the future of dining out and home indulgence are being reshaped by economic realities.

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Source: Noah Wire Services