How the cost-of-living crisis is set to affect your financial resilience

Susannah Streeter: Hello, and welcome to Switch Your Money On from Hargreaves Lansdown, I'm Susannah Streeter. I'm the senior investments and markets analyst here at Hargreaves Lansdown, and, as usual, I'm with Sarah Coles, our senior personal finance analyst. Sarah, I know you said you've been a bit of a voice of doom lately because we've seemingly had nothing but bad news for people's finances. Are you feeling particularly doom-laden today?

Sarah Coles: I'm sorry, I always feel really terrible doing this, but I'm just no cheerier than usual. I've actually spent some time looking back over the past six months, because we've been working on the latest edition of the HL Savings and Resilience Barometer with Oxford Economics, and it made me realise that, in January, we actually dared to feel slightly optimistic that the worst of the pandemic was over. Of course, now, the cost of living crisis means an awful lot of us are struggling with money far more than we were even at the height of the pandemic.

Susannah Streeter: Yes, I can see why you've decided to be the voice of doom. There is certainly a lot of worry around, but there are some bright spots. Call me an optimist. Some markets are seeing some positivity, so we'll explore some of that a little bit later, but we are delving into some of the challenges facing people's finances to start off with, in this episode that we're calling 'Reading the barometer, feeling the pressure.'

Sarah Coles: Yes, we'll be talking to Nathan Long, a senior analyst at the policy team at Hargreaves Lansdown, who's been instrumental in putting the barometer together. Nathan, it's a massive piece of work, isn't it?

Nathan Long: Yes, it sure is Sarah. I think I've got the additional grey hairs to prove it. It's something we put together with the specialists at Oxford Economics, which takes a huge number of different measures of people's finances. It brings them all together, so that we can understand exactly what's going on in people's financial lives right now. Actually, one of the real benefits of this work is that we can also use it to forecast what we think's coming down the tracks as well.

Susannah Streeter: I'm going to hope for some optimism in there, although I suspect there are some really tough months to come. We're also chatting with Helen Morrissey, our senior pensions analyst, who's been looking at the implications for pensions.

Helen Morrisey: Yes, we've been looking, in particular, at how the way we save for pensions might change, and modelling the impact that that would have on people's overall finances.

Susannah Streeter: Well, looking forward to hearing more about that a bit later, Helen. There are certainly some really interesting challenges ahead. We're also looking forward to finding out more about what the tougher environment means for retailers, with a catch-up with Sophie Lund-Yates, who's our lead equity analyst, of course. Sophie's been looking at how some businesses might weather the storm. We'll also catch up with Emma Wall, our head of investment analysis and research, who's been speaking to Edward Smith, co-chief investment officer of Rathbone Investment Management, and we will, of course, have the quiz, and this time we're looking at some great money saving tips through the ages, so I hope you're ready, Sarah.

Sarah Coles: Finally, something that feels a bit more familiar. I might actually be on for more than a couple of points this time. Before we get to the quiz, it's worth exploring where we find ourselves right now. So, the Office for National Statistics regularly asks people about their concerns about rising prices, and in its survey in June nine in ten people said the cost of living was rising, so we're still overwhelmed by worries about energy bills and prices at the supermarket, but after more than a month of record petrol and diesel prices, one in five people said it was their biggest cause of anxiety. The same study found we were doing an awful lot of really the most sensible things that we can in order to cut costs. So, that includes things like shopping around and cutting out luxuries, but some people are actually turning to more drastic measures, including two in five who are actually buying less food.

Susannah Streeter: I'm going to be the voice of doom now, because the latest from business indicates that the worst isn't over yet, I'm afraid. The latest snapshot from the Office for National Statistics shows that almost a third of businesses are expecting to increase the price of goods or services they sell in July, so this month right here and now. Now, already shoppers are showing signs of setting strict limits on spending, and this warning that further price increases are on the way will be another blow to their financial resilience. The urge to socialise may be strong, I certainly have it, but it is set to get even more expensive in many bars, restaurants, and hotels. Accommodation and food services was the sector with the biggest proportion of businesses expecting to hike prices in July, with almost half of firms set to pass on higher costs to customers. Companies are really struggling with higher input prices, and rising gas and electricity bills in particular are becoming so onerous that bosses can no longer keep absorbing them, so consumers are having to make some pretty big choices about budgeting, and the hospitality industry is bracing for a decline in spending as the cost of living crisis intensifies. The economy is already set to contract in the second quarter of the year, and stay pretty fragile in the months to come. Now, at some point, Sarah, this weakening demand should help bring down inflation, but it is going to be a pretty arduous adjustment for companies and consumers. The governor of the Bank of England, Andrew Bailey, has warned that the UK should expect to suffer a more severe bout of inflation than other major economies.

Sarah Coles: Then, of course, even on top of that, we've been wrestling with tax rises. So, finally, there's some good news on that front, because the National Insurance threshold moved on 6th July, which is likely to feed into pay packets at the end of this month. It means 30 million people will see their take home pay rise, and 2.2 million will be taken out of paying National Insurance entirely. So, for those who pay it, it'll mean they pay less, which can only be a good thing, but we do need to put that in context, because this is actually just a tweak to a tax that was hiked in April, and while most people will pay less tax, almost a third of working taxpayers will still be paying more NI than they were before March. At the same time, the freeze on income tax thresholds has been inflicting more damage. So, the Institute for Fiscal Studies estimates that by the time we've lived through four years of threshold freezes, so that's in 2025 to 2026, almost every worker will be paying more tax. So, it means tax will be adding to the burden of higher prices again, which isn't the good news I promised.

Susannah Streeter: Never mind Sarah, thanks anyway, but it is against this backdrop that the Savings and Resilience Barometer has been produced. So, let's bring in Nathan Long, who's a senior analyst in the policy team here at Hargreaves Lansdown. He's been working really closely on the barometer over the past six months. So, Nathan, can you start by telling us a bit more about what the barometer actually is.

Nathan Long: Yes, sure. This is the work that we do in partnership with Oxford Economics. So, the HL Savings and Resilience Barometer measures the financial resilience of the nation, and it does it every six months. It's structured around the five pillars of our finances that we think need to be balanced carefully for us to be financially resilient. Now, these are controlling your debts, protecting your family, saving for a rainy day, planning for later life, and investing to make more of your money. Now, what's really unusual about the barometer, from a research perspective, is instead of looking at something like savings or debts on their own, it draws all of this together for a holistic measure of the state of our personal finances.

Susannah Streeter: So, what have you found?

Nathan Long: Well, overall, the barometer has really revealed just how tough things are right now. So, the cost of living crisis is basically laying waste to the extra resilience that we managed to build up during the pandemic. Now, when you factor in inflation into people's wages, and subtract the cost of the basics, you're basically left with something that's known as real disposable income, and that's down 3%. So, basically, people have got less to live on now. Now, as a result of this, in the past three months, we project that 41% of households were forced either to cut their costs, dip into their savings, or borrow more money to cover their costs. It's also showing that not only are things bad, they're going to get even harder.

Susannah Streeter: I hardly dare ask, but what did the forecasts show?

Nathan Long: So, the barometer looks forward twelve months, to see how much worse things might be by then, and it really isn't good news. So, income isn't set to recover. Even factoring in the government's lump sum payments, it's going to remain broadly flat for the rest of the year. The last time we ran the barometer, so that was in January of this year, overall, people had actually managed to build their resilience during the pandemic, and that's because they were going out less often, spending less, and so they actually were forced, almost, into building up additional savings. This time we know that, by the time we get to the middle of next year, all of that extra resilience that was built up is going to have been wiped out, and it's not even. So, the highest three-fifths of earners may have less to save, but the lowest two-fifths may be forced to eat into their savings or borrow more. The bottom 20% of earners, we know, will see any savings from the pandemic wiped out over the next year completely. So, given that they were less likely to have been able to build up savings during lockdown, it means that more of them will be forced to borrow. It's just going to widen the gulf between the high income and the lower income households. One of the key advantages of the barometer is that it looks at our finances holistically to understand the implication of all these changes. So, it shows that not only will higher inflation mean fewer people have enough income to get them to the end of the month, but we're also building up problems for the future. So, the work shows that we're set to save less over the next twelve months, fall further behind on pension saving, and invest less on average, just as times get tougher.

Now, it's easy to, kind of, focus on the short-term, when we're in times of crisis, but pension savings really aren't going to keep up with the amount of money we'll need in retirement, because of this rising cost of goods. So, anyone who finds a little bit of extra surplus income, if they're able to stay on top of rising prices, actually they shouldn't overlook the need to put money away for the longer-term, and continue to build their resilience in retirement.

Sarah Coles: So, you mentioned inequality there. So, how is that going to be affected?

Nathan Long: Well, the forecasts show that it's going to hit those on lower incomes three times harder than those on the highest incomes, and that's partly because they've got less to fall back on, partly because they've got less wiggle room in their budgets to begin with, and it's partly because they spend a larger proportion of their income on essentials. So, what that means is the runaway cost of things like gas, electricity, and food, they're going to have enormous problems for the household budgets of particularly lower income households. So, the result of all that is basically the gulf between the resilience of higher and lower income households, that grew during the pandemic already, is going to widen again as the impact of the cost of living crisis really starts to bite. Now, there's every chance that the lower earners will need more support as we go through the year, which could mean that any future government interventions are targeted even more specifically at those of the greatest need, although clearly, at the moment, the government's approach is hard to second guess, given the state of flux that it finds itself in currently. It's also going to mean that it's essential for anyone discovering that they can't make it to the end of the month goes and gets help sooner rather than later.

Sarah Coles: So, you've talked about what's clearly going to be a really challenging time for people on lower incomes, but it's not all plain-sailing for those who are earning a bit more, is it?

Nathan Long: No, it's not. Actually, higher income households are still going to have their fair share of problems, because, whilst they'll be able to hang on to some of their lockdown savings, there's other issues as well. So, because we've got this interest rate rise coming through, it's going to be harder to cover the cost of borrowing, especially for those with big mortgages who are on fixed rate deals. Now, we're not expecting a huge number of fixed rate deals to expire in the short-term, but, longer-term, that is going to be a bit of a problem, and that's going to hit those higher income households particularly hard because they tend to borrow more. So, it means that, with this group in particular, the higher income households, it's worth getting to grips with that borrowing sooner rather than later. So, there's a strong argument for cutting back wherever possible, and paying back expensive borrowing, so you're living life less deeply in the red.

Sarah Coles: So, there's a huge amount to explore here. Can people go in and explore some of the findings themselves?

Nathan Long: Yes, they can. So, we built a comparison tool on the Hargreaves Lansdown website, which lets you identify people in the same boat as you, and helps you understand your strengths and your potential weaknesses. So, links for this will be in the show notes for any listeners that are curious to find out more. We've also built out our personal finance 'five to thrive' tips. Now, they offer support based around those five pillars of resilience that we talked about, and people can then go away and take steps to improve their own financial resilience.

Sarah Coles: Thanks Nathan, loads to get our teeth into there. I'm sure we'll be catching up with you again in six months' time, and hopefully we can look back, at that point, as this being the worst of it.

Nathan Long: Yes, I'd love to come back on. Hopefully we'll have some better news in six months' time.

Susannah Streeter: Thanks very much Nathan. Well, let's bring in Sophie Lund-Yates now, our lead equity analyst at Hargreaves Lansdown. Sophie, you've been looking at some companies to watch. What's caught your eye in the healthcare sector?

Sophie Lund-Yates: Healthcare is an important one when trying to think of sectors that perhaps have a a bit more resilience if and when the economic backdrop becomes a bit shaky. It falls into the category of non-discretionary, so that's the things that either people or companies will still need to buy, no matter what. Health consciousness has only been heightened by the conditions of the last couple of years too, when we think about it, and that's why I've been looking at CVS Health, which is known, corporately, as a health solutions company. Now, the company segments include pharmacy services, retail, and healthcare benefits. The group has close to 10,000 retail pharmacy locations across most of the US, Colombia, and Puerto Rico. CVS claims that there is a CVS pharmacy within five miles of most Americans, and it's this extensive network that really sets it apart, with convenience being a core driver of traffic as well. Added to that, there's also a mail pharmacy service. I think it's important to mention cost here.

So, CVS has a focus on keeping costs low, which can be a tactic that hurts margins, but not if volumes rise enough, and that's obviously the crux of it. Frankly, that is a balancing act the group is getting right. There are also some exciting growth areas, especially looking at primary care and home health, in my opinion. Financially, looking at the first quarter, which ended back at the end of March, total revenue for CVS Health rose by almost $8 billion to $76.8 billion, so within a whisker of $77 billion, which beat estimates by $1.5 billion. Within that, underlying operating profits rose from $4.2 billion to $4.5 billion. This attractive model contributes to a prospective dividend yield of 2.4%, with the projected dividend currently looking very well-covered by earnings. Now, figures are from Refinitiv, I should put out, and they are correct as at 4th July. As ever, please remember that no dividend is ever guaranteed, and yields are variable. Our listeners are probably wondering what the downside is. So, CVS is benefiting from over the counter COVID vaccines and tests, and while demand should be elevated for a while, in my opinion, it will wind down, and the exact pace and trajectory of that is hard to say. As with any stock, a worse than expected performance could dent sentiment.

Susannah Streeter: Okay Sophie. So, that's one to watch potentially in healthcare, but what about the luxury market?

Sophie Lund-Yates: I've been looking at luxury giant, Hermes. I'm probably butchering that pronunciation, but so long as my mum's not listening we're fine. Luxury names, and I'm talking real, high end luxury, rather than your midscale names, can have more going for them in hard times. That's because they're traditional ultra wealthy customer base is far less affected by the ups and downs of the economy, and is less likely to feel a life-altering pinch from inflation compared to retail chains relying on more middle class incomes. There are a couple of luxury names I could have chosen for today, but I wanted to talk about Hermes, which is the maker of the famous $9,000 Birkin bag. Now, the main appeal of luxury names are their brand power, which is what allows them to charge big and inflate margins in the process. I'm especially impressed by the group's efforts to protect the brand. Despite enormous demand, it's said it won't increase production of Birkins by more than 8%, and instead prefers to have long waiting lists. That is savvy, in my book. Now, the group also has best-in-class operating margins, which did a stonking, and I don't use that word lightly, 40%, very impressive, and helps underpin the group's ability to pay a dividend and stomach any disruption. Now, it won't come as a surprise to hear me say that the luxury sector suffered over the pandemic, with stores closed around the world. However, the group's revenues are back at pre-pandemic levels, and are expected to reach €10.5 billion in the current financial year.

The one drawback to keep in mind is that growth from here is expected to be quite slow. So, slow and steady can be no bad thing at all, but this isn't something investors should be looking at as an exciting name in the sector, is what I would say.

Susannah Streeter: Finally, let's move from luxury to the high street. What's your take on Associated British Foods?

Sophie Lund-Yates: At the opposite end of the spectrum we have Primark, which is owned by Associated British Foods, and Primark is the biggest division for the group. So, as households feel pressure, with a weaker economic outlook, consumers can slide down the value chain to discount options. Now, this is a dynamic I think that's much less likely to be seen at the upper to middle fashion ranges, but those feeling the pinch in the middle of the market might well start shopping at Primark instead. The group's also more likely to be able to capitalise on that shift, because it has proven it has its pulse on trends, with it able to shift absolutely huge piles of excess stock after lockdowns, despite not having an online shop to speak of. So, that was impressive in my book. I was genuinely impressed by the speed it was able to do this, and that only happens, without having to have a huge sale, when your buying processes are on the money. Now, as ever, I need to give the other side of the argument, and a very steep recession would result in pretty much all fashion retailers facing a challenge. So, while I think Primark is much better placed than some, I certainly can't be ruling out any ups and downs.

Susannah Streeter: Thanks, Sophie, really great to get your take, and we're now going to come back briefly to the barometer, because we've got some more really interesting findings.

Sarah Coles: Part of the barometer work this time around has been a more in-depth look at pensions, so let's speak to Helen Morrissey, Senior Pensions Analyst at Hargreaves Lansdown. Helen, we use the barometer to track people's resilience when it comes to getting ready for retirement. How has this evolved?

Helen Morrisey: So, the barometer has thrown up some really interesting insights. So, ten years ago, rules were introduced that meant anyone aged over 22 and earning more than a certain amount was automatically put into a workplace pension, unless they opted out. Now, this is what is known as auto-enrolment. This got people saving, but the big issue now is whether they're actually saving enough. So, the current minimum contribution is currently 8%. Now, that's made up of a 3% contribution from the employer, and a 5% contribution from the employee. This is a great start, but it's not enough for most people to generate a decent retirement income, so we are still risking people retiring on not enough money to meet their needs.

Susannah Streeter: So, aren't there plans though, Helen, to increase the minimum contributions to help people save more? Do you think that is the best way forward?

Helen Morrisey: There has been a lot of discussion of how we can get people to contribute more to their pensions, and in the 2017 auto-enrolment review, the government looked at options such as allowing people to be enrolled from the age of 18, rather than 22, and letting people start contributing from the first £1 of their earnings. Now, it said it would look to introduce these reforms from the mid 2020s, and it has come under a lot of pressure recently to put some kind of timetable in place. In addition to this, the ABI has made further proposals on increasing minimum contributions. Its recent report proposes to bump the employer contribution up to 5% in the first instance, which would bring the minimum contribution up to 10%. There would then be an option for both employer and employee contributions to increase to 6% each over the coming years. Now, there are positives to this, but we do have to be careful about adding to the burden on people, especially during the current cost of living crisis.

Susannah Streeter: Yes, you're right, Helen, but saving more for retirement is surely a good thing for people's financial resilience. It's a very tricky balance, isn't it?

Helen Morrisey: It is. So, putting more away for retirement will certainly help people's long-term resilience, but people need to balance building their long-term resilience with what they need in the here and now. So, we used a barometer to model both scenarios that I mentioned above, so expanding auto-enrolment, and then increasing contributions to 12%. Now, in both cases, we saw a demonstrable drop in short-term financial resilience for people, particularly those on lower pay, if they were to be introduced particularly during the current climate.

Susannah Streeter: So, can you tell us a bit more about what you found?

Helen Morrisey: So, looking at the data, it's clear that any changes to auto-enrolment need to be carefully timed, and now is not the right time to make any changes. If we did see changes, the likelihood is that we would just see very high rates of opt-out, as many people simply can't afford to contribute to their pensions, or contribute more to their pensions rather, right now. Delaying it to 2025, when we're more likely to have more normal conditions, would certainly help in terms of minimising these opt-outs. Now, if we did this, the barometer shows us that if we increase contributions to 12%, then we could see a just over 9% increase in the nation's long-term retirement resilience after five years. This would come at a cost. Our modelling shows that these changes would mean that people's surplus income would dip by almost 9%, and savings could see a drop of 10%. So, if we just looked at expanding auto-enrolment, we would still see a 3.5% increase in retirement resilience, but again, a 3% fall in surplus income on average, as well as a similar drop in emergency savings.

Susannah Streeter: It sounds like a really tough one, but what do you think the approach should be?

Helen Morrisey: We believe the government should press on with the proposed automatic enrolment expansion plans, so this is moving the age down from 22 to 18, and allowing people to contribute from the first £1 of income. However, we think it should be timetabled some way in advance, so we can be sure that any lingering effects from the cost of living crisis are not still in play. So, the modelling from Oxford Economics suggests that this should not happen before 2025 at the earliest. In terms of the other suggested amendments, we don't think that minimum contributions should be increased further. Instead, we need to explore how we can encourage people to voluntarily increase their contributions where possible. This would give people a compelling reason to engage with their pension, and it means that people would only save more as and when they're able to. It has a real potential to help people build their longer term financial resilience, while not damaging their day-to-day finances.

Susannah Streeter: Thanks very much, Helen, it does look like a really difficult balance that it's crucial to get right. Thanks again. You're listening to Switch Your Money On, from Hargreaves Lansdown, and now I'd like to bring in Emma Wall, our Head of Investment Research and Analysis here at Hargreaves Lansdown, and she's been talking to Edward Smith, who's Co-chief Investment Officer of Rathbones Investment Management.

Emma Wall: Hi, Edward.

Edward Smith: Hello, Emma.

Emma Wall: So, we are talking at a time of considerable political uncertainty. Everything seems rather up in the air, so in the interest of being non-timely, we won't talk about politics, but I would very much like to talk about economics. What is the outlook for the UK economy from where you're sitting?

Edward Smith: Well, our outlook for the UK economy is quite a pessimistic one. While we do not think that a recession is likely to start globally or in the US in the next six to twelve months, we are running with a greater than 50% chance that the UK economy falls into a recession. Household sector is likely to suffer a bigger hit from a fall in the standard of living, as people's wages get eroded by inflation, a little more severely than in some other parts of the world. Its business investment sector isn't really going to be picking up the slack. That's been extremely weak all the way back to 2016, since the vote to leave the EU, and household savings in the UK, whilst, you know, there are plenty of excess savings, they're a little more inequitably distributed than elsewhere, and probably are less likely to be drawn on given that huge plunge in consumer confidence.

Emma Wall: Looking back around fourteen years ago, thirteen years ago, 2008, 2009, 2010, where we saw a global recession, that saw everything get pulled down together from the Global Financial Crisis. I think it's quite interesting from what you're saying today, there are some differences between different countries and different regions, and in part that's to do with energy prices, isn't it? Because the US is much more self-sufficient when it comes to energy, and therefore potentially isn't as hard hit as we are here in the UK, by the energy prices, which have just gone through the roof since Russia invaded Ukraine.

Edward Smith: Yes, that's absolutely right. So, I mean, look at natural gas prices for example. So, the wholesale price of gas, what the people we buy our gas from pay in the market, in Europe or in the UK, has risen sharply, particularly in Europe in the last few weeks, as its delivery of gas from Russia has been squeezed even further, but in the US, wholesale natural gas prices have actually spent the last few weeks falling, and they're much much lower over there than they are over here. That's really going to hurt manufacturers as well. If we look at the average price of energy, from all different sources of energy, translated into a, sort of, price per barrel of oil equivalent as we call it, so in Europe they're paying around about $180 a barrel of oil equivalent for their energy. In the US, it's only around about $55, and in the UK, well over $100. There are some other key differences to the US as well. A slightly better momentum in household spending, a large cache of savings to draw from, and more buoyant business investment too.

Emma Wall: There are a number of factors that are completely out of political, and household, and even Bank of England control, when it comes to the headwinds in front of us. Inflation is running very high, not just here in the UK but across the world. What can the powers that be do to try and control that inflation?

Edward Smith: I don't think there is an awful lot that the central banks can do to today's inflation to bring it back down, particularly in the UK, where around about 75% of the inflation is coming from either food or energy, or the categories of goods that had outsized demand during lockdown and supply chains that failed to keep up. Now, those three categories, food, energy and certain types of goods, are not something that are really where the inflation's really domestically generated, where the UK central bank, by changing interest rates, could really hope to quell demand and bring inflation back down. So, the obvious question is, why are the central banks doing anything at all? It's to stop the inflation today becoming really entrenched and generating even more inflation tomorrow, or next year, as inflation expectations start to rise and people start to demand higher wage growth. That's what the bank is trying to quell. The actual inflation we're seeing today, as you say, is largely not really within their control.

Emma Wall: I suppose the multibillion, trillion dollar question is, how long does this last?

Edward Smith: As investors, I think we're going to need to see a few more months of data before investors start to, sort of, climb back down that wall of worry that's been built up around, when will inflation peak? At what level will interest rates rise to? Core prices look as though they have started to peak, but they are falling back at a slower rate than anticipated, so there's a little way to go on that one. As for the UK economy, going back to where we started with this conversation, I think this pain for household consumption is likely to continue until certainly into the first half of 2023. Remember, headline inflation isn't going to peak until the fourth quarter most likely, because we've got more rises in our energy costs as the Ofgem energy cap gets raised again.

Emma Wall: Edward, thank you very much.

Edward Smith: Thanks, Emma.

Susannah Streeter: That was Emma Wall, our Head of Investment Research and Analysis at Hargreaves Lansdown, talking to Edward Smith, Co-chief Investment Officer of Rathbones Investment Management. Please bear in mind that these are the views of the fund manager, and are not individual stock recommendations. You're listening to Switch Your Money On.

Sarah Coles: Finally, it's time for the quiz. Susannah has been tracking down some unusual ways of saving money, which sounds far too practical and useful to be one of our quizzes.

Susannah Streeter: Well, you'll have to judge for yourself whether I've really stuck to the useful things. Mrs Beeton, in her book of household management, published in 1861, and I do have a copy on my bookshelf, you'll have to have an eagle eye to some of my TV appearances to check that out, but I do, she had lots of top tips for managing the household budget, and recipes for cheap meals. Which of the following bargain meal was on the list? It's on Mrs Beeton's list. Was it, stone soup, toast sandwiches, or lettuce salad?

Sarah Coles: Well, none of them sound particularly delicious but, do you know, I have memories of stone soup as being a children's story, so I don't think it's that one. I'll go for lettuce salad.

Susannah Streeter: No, it was a toast sandwich. Honestly. It was a piece of dry toast between bread and butter, but crucially with salt and pepper to taste, which is impressively frugal. We'll stick with some unusual cost-cutting of the past. This time, it was during the 1940s. In an effort to cut back during the Second World War, what change were people advised to make in the bathroom? Was it, to put a brick in the cistern to use less water, to use lard instead of soap, or was it to use no more than 5" of bathwater in your weekly bath?

Sarah Coles: Weekly bath, that's impressive. They all sound a bit odd but, do you know, lard was probably just as hard to come by as soap, so it can't be that, so I will, I'll stick with limiting your bathwater.

Susannah Streeter: Yes, you are right. People were encouraged to paint a ring in the bath at 5" to make sure they didn't use any extra coal to heat the water. Apparently, even Buckingham Palace added these lines to their baths. Cue lots of lines being drawn on bathtubs as we speak. Okay. Coming forward a bit in time, and off to the supermarket, one of the best ways to cut your costs is to consider an essentials range, but if you were shopping at Waitrose, which of the following could you snap up from its essentials items? Is it olives, Brie, egg tarts, pâté, or bottled water?

Sarah Coles: You know what, I know that the Waitrose Essentials range, it takes some pretty upmarket items, so I think it might be all of them.

Susannah Streeter: You're right. As well as pre-sliced cheese and olive oil, none of which are the first things you would think about when it comes to buying from the budget range, but they're all essentials in Waitrose. Okay, sticking with the supermarket, in Tesco, where is the cheapest place to buy cashew nuts? Is it in the nuts and seeds section, roasted and salted in store with the snacks, or in a larger bag in the South Asian section?

Sarah Coles: Ooh, well, it's the sort of thing that tends to be cheaper with the ingredients for specific cuisines, so I guess it's the South Asian section, but do you know, this feels like it might be a trick question.

Susannah Streeter: You're right, in a way. It's the exception to the rule. They are actually cheapest of all roasted and salted, at £11.43 per kilogram, almost £1 cheaper per kilogram than if you bought it with the nuts and seeds, so you could wash off all the salt and save a bit of money, Sarah.

Sarah Coles: I don't know if it's worth the effort though really, is it?

Susannah Streeter: Well, I don't know. Maybe you could use that old bathwater that you've drawn a ring around your bath for at the end, double up on all those money-saving tactics. That's all from us for this time, but before we go, we need to remind you that this was recorded on 11th July 2022, and all information was correct at the time of recording.

Sarah Coles: Nothing in this podcast is personal advice. You should seek advice is you're not sure what's right for you. Investment rise and fall in value, so you could get back less than you invest, and past performance isn't a guide to the future.

Susannah Streeter: Yes, this is not advice or a recommendation to buy, sell or hold any investments. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

Sarah Coles: This hasn't been prepared in accordance with legal requirements designed to promote the independence of investment research, and is considered a marketing communication.

Susannah Streeter: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place, including dealing restrictions, physical and information barriers, to manage potential conflicts of interest presented by such dealing.

Sarah Coles: You can see our full non-independent research disclosure on our website for more information. So, all that's left is for me to thank our guests, Nathan, Helen, Edward, Sophie, Emma, and our producer, Elizabeth Hartson.

Susannah Streeter: Thank you so much for listening. We'll be back again soon, so if you enjoyed this podcast, please do let us know what you think, and do subscribe wherever you get your podcasts, so you get a fresh new episode in your inbox as soon as it's ready. Goodbye.