Cost of living crisis hits UK businesses with customer satisfaction at lowest level since 2015, UKCSI finds

Poor handling of customer complaints has driven a record plunge in customer satisfaction across all sectors of the UK economy, according to the latest UK Customer Satisfaction Index (UKCSI) from The Institute of Customer Service.

The latest index, published today, shows the sharpest year-on-year fall since records began in 2008, with all sectors experiencing a fall compared to 12 months ago.  By contrast, organisations delivering the highest quality of customer service are being rewarded with greater loyalty and growth amidst the record fall in service levels.  Published twice a year, the UKCSI is the barometer of customer satisfaction in the UK, tracking sentiment towards the largest organisations across all sectors of the economy.

Under increasing pressure, including rising costs and staff shortages, businesses are taking longer to resolve complaints, with 48% of customers who experienced a problem saying that it took longer than they expected for it to be resolved, compared to 37% in July 2022.  This is costing UK businesses £9.8bn in lost time, placing a significant drag on productivity.

The report said that many businesses have overestimated their capacity to integrate data, systems and processes and have not always invested sufficiently in developing skills and capabilities, nor enabled career pathways to retain employees.

Most firms in the utilities sector, such as energy and water companies, are doing particularly badly in terms of customer satisfaction, set against rising bills and heightened scrutiny.  Customer satisfaction in the energy sector has fallen by 5.3 points, whereas water companies have declined by 3.5 points in the last year.

There was brighter news for the tourism sector, which accounted for 7 of the index’s top 13 most improved firms.  Tourism is now second only to retail (non-food) for customer satisfaction.  Jet2holidays.com continues to be one of the UK’s highest-rated organisations for customer satisfaction.  Hoseasons saw the biggest improvement of any organisation, achieving their highest ever score, as did Hotels.com and Expedia.

In the retail food sector too, companies outperforming the sector average by at least one point have grown sales by an average of 17.6% compared to the market average of 10.8%.  Similarly, in the banks and buildings sector, a rise in switching activity has been partly driven by the quality of customer service.

Commenting on the release of the UKCSI, CEO of the Institute for Customer Service, Jo Causon, said: “We need to reflect honestly on the causes of the decline in customer satisfaction, and what this means for businesses, customers and the wider economy.  Well-run organisations balance the needs of all stakeholders, shareholders, customers, employees and suppliers.  We know there is a clear link between employee engagement, customer satisfaction and the productivity and profitability of organisations.

“With high inflation and price pressures expected to remain until 2025, organisations that proactively engage with customers through a range of communication channels, and put in place initiatives to support them through this tough period, can navigate these issues and cement customer relationships.  This is not only important right now, but offers a way of helping us out of our current challenges – focusing on long-term outcomes, not just short-term fixes, means thinking differently.”

The research by The Institute also shows the number of customers who feel their financial well-being is ‘poor’ or ‘very poor’ has increased from 12% last year, to 18% this year.  Meanwhile, more than 60% of customers believe companies should hold prices for essential products and services, regulators should limit the price of essential services, and shareholders and investors should be prepared to accept lower profits.  High levels of inflation and the rise in the cost of living have forced organisations to balance decisions affecting the interests of customers, employees and shareholders, which is reflected in these sets of results, the worst since 2015.

Green shoots for retail banking on back of focus on, and investment in, the customer experience

While satisfaction with retail banking fell on the whole (down 0.3), the sector performed comparatively better than others in the UK.  Three of the top ten scoring businesses in the UKCSI, including the top two, were in the banking sector.  first direct and Starling Bank, the top two rated companies overall, were joined by Nationwide Bank in the top ten for customer satisfaction.

With households under severe financial pressure, Nationwide has been the biggest beneficiary of current account switching.  Between October and December 2022, Nationwide achieved over 111,000 net current account gains, the strongest ever quarterly performance recorded by the Current Account Switching Service, partly owing to Nationwide offering new account joiners a £200 cash incentive for switching.

Service benefits remain the core reasons that customers prefer their new current account to their old one, with online or mobile app banking (41%) and customer service (29%) listed as the top two reasons for people preferring their new current account, according to the Current Account Switching Service.  This demonstrates the case for investment in these areas. 

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