Consumers are cutting back on eating out and takeaways to reduce discretionary spending, according to a survey by KPMG.

Despite the drop in inflation to 2%, four in 10 British households are saving c£77 per month by reducing non-essential expenditure, while just under half of those surveyed said their non-essential spending remains unchanged this year.

Restaurants, takeaways, and clothing were the biggest areas of cutbacks, alongside beauty products and subscription streaming services.

About one-third of respondents said they were switching to cheaper food and drink brands, buying more promotional and discounted items, and using loyalty reward schemes to save money.

About 5% of consumers said they were making larger savings worth £200 per month.

Linda Ellett, head of consumer and retail at KPMG, said: “Slowing inflation does not mean that consumers are seeing a reduction in prices and costs and the overall squeeze on many monthly budgets continues.”