Arrested development: How AI-driven value propositions can recover lost loyalty
Successive years of high inflation in the UK have put pressure on households, with everyday essentials like food seeing rapid rises in price since the pandemic.
In a challenging economic climate, it’s natural for shoppers to look away from loyalty and towards value, leading some brands to face stalling growth.
However, new opportunities unlocked by AI could be the solution, as the UK government continues to invest in ways to exploit artificial intelligence for the benefit of British businesses.
In this report, we look at recent trends in the UK economy, the impact of these on consumer spending habits, and how AI-driven value propositions can help brands to recover lost loyalty.
The five-year fall in affordability
The cost of living crisis in the post-pandemic era has had a chilling effect on consumer spending, leading many to prioritise value over brand loyalty.
Following a prolonged period of relative stability, inflation on the UK Consumer Price Index fell to 0.99% during 2020.[1] But since then, CPI has hit levels not seen since the early 1990s:
- 2021: 2.52%
- 2022: 7.92%
- 2023: 6.79%
- 2024: 3.27%
The cumulative impact of this is that prices are around 22% higher than in 2020, while median full-time earnings have not grown by nearly as much in the same period.[2]
Consumers have responded by spending more carefully. The 2025 EY Future Consumer Index, published in May, found that 81% of people were concerned about their financial position at the time.[3]
The erosion of loyalty
Money worries are a surefire way to prompt previously loyal customers to switch brands. EY’s survey found that value was twice as important as brand in driving shoppers’ buying choices.
Nearly half of respondents (45%) said they were shopping with discount retailers, while 42% had switched to cheaper or own-brand alternatives.
At the same time, 77% believed their financial position would improve or remain the same in the coming year. This suggests that there is growing potential for premium and luxury brands to regain and retain market share as we move into 2026.
Tapping into the potential of AI
EY also asked consumers about their use of AI when choosing what to buy. Nearly two thirds (62%) said they have not yet purchased a product based on an AI recommendation.
Yet there was a remarkably even split when asked if AI is a useful shopping tool:
- Very useful: 36%
- Fairly useful: 26%
- Not useful: 39%
The study found that half of all AI product recommendations favour premium brands, which could be a way for luxury manufacturers and retailers to regain a competitive advantage.
Silvia Rindone, EY UK&I retail lead, said: “Looking to the future, technology, and AI in particular, will provide retailers with a new opportunity to reshape their organisations and improve the customer proposition.”
How the UK is embracing AI
The UK government is already working on a range of trials to discover how AI can help small businesses across the country.
At the start of the year, the government announced 120 projects with total funding of £7 million, and spanning industries including bakeries, dairies, road maintenance and strawberry farms.[4]
The announcement coincided with the publication of the AI Opportunities Action Plan.[5] The document notes the “extraordinary pace” at which AI capabilities are developing.
“If this continues, AI could be the government’s single biggest lever to deliver its five missions, especially the goal of kickstarting broad economic growth,” it adds.”
Counting the UK’s AI capacity
The UK Compute Roadmap was published in July 2025 and estimates that demand for cutting-edge computing power could increase by 5.7x in the coming decade.[6]
With the activation of the Isambard supercomputer coinciding with the publication, the AI Research Resource (AIRR) became fully operational. Its capacity is huge.
The AIRR can process in one second the equivalent of the combined population of the Earth working for 80 years without taking a break.[7]
By 2030, its processing power is planned to grow further to 420 exaFLOP, the equivalent of a billion people working for 13,316 years. To complete that one-second AI task, those people would have needed to start their calculations 8,000 years before Stonehenge was built.
What is the economic potential of UK AI?
Government plans like “build a brand new supercomputer with enough AI power to play itself at chess half a million times a second”[8] make good headlines, but what do they mean in economic terms?
According to the IMF, embracing AI fully could add 1.5 percentage points to annual productivity, worth nearly £50 billion a year to the UK economy.
Prime minister Keir Starmer said: “AI will drive incredible change in our country. It has the potential to transform the lives of working people… In a world of fierce competition, we cannot stand by. We must move fast and take action to win the global race.”
How can businesses use AI now?
AI is already helping many businesses with their decision-making. It is particularly good at analysing data and identifying trends, while generative AI also has applications in customer service and communications.
The human touch is still important: Capgemini UK found that more than 70% of consumers prefer human customer service agents, although younger generations are more inclined to use AI chatbots where available.[9]
Capgemini’s report also found that less than half (49%) of businesses are currently prepared to offer AI customer service.
Franck Greverie, group executive board member at Capgemini, said: “With over half of consumers prepared to leave a brand due to poor customer service, even if their purchase is good, business leaders now recognise that exceptional customer service is no longer a luxury but a strategic imperative.”
Catering to customers with AI
UK consumers are already using AI to research products, discover new purchase options and access customer service when they need it. At the same time, there is still significant potential for growth, both in terms of audience size and in economic value.
British businesses should embrace this trend. The recent cost of living crisis has introduced turbulence into the retail market – and times of change can be a good time to grow as wages catch up to price inflation.
AI can analyse existing data to identify ways to encourage loyalty, as well as to reach out by offering much-needed value propositions to new customers. By combining this with an enhanced customer service experience, you can cater to consumers’ needs and expectations from all sides.
EY’s Silvia Rindone added: “Over half of UK consumers are already using AI to enhance their online shopping experience. The risk for retailers is that they fail to adapt, and miss an opportunity to reach the consumers of tomorrow.”[10]
[1] https://www.macrotrends.net/global-metrics/countries/gbr/united-kingdom/inflation-rate-cpi
[2] https://www.statista.com/statistics/802113/annual-earning-growth-in-the-uk/
[3] https://www.ey.com/en_uk/newsroom/2025/05/brand-loyalty-declines-as-financial-concerns-persist
[4] https://www.gov.uk/government/news/government-puts-ai-to-work-for-bakers-road-workers-and-more
[5] https://www.gov.uk/government/publications/ai-opportunities-action-plan/ai-opportunities-action-plan
[8] https://www.gov.uk/government/news/prime-minister-sets-out-blueprint-to-turbocharge-ai
[10] https://www.ey.com/en_uk/newsroom/2025/05/brand-loyalty-declines-as-financial-concerns-persist