Discretionary spending shifts are reshaping London’s service economy

Discretionary spending hasn’t vanished, it has evolved — and advance planning and clear value propositions now matter more than foot traffic alone

HOUSEHOLD BUDGETS ACROSS London and Southwestern Ontario have entered a more cautious phase in 2026. Inflation may no longer dominate daily headlines, but its after-effects linger in grocery bills, rent, and insurance costs. Layer on higher borrowing costs, and many families are finding that discretionary spending is the first place to tighten.

This shift matters because services form a large share of the local economy. Restaurants, entertainment venues, fitness studios, and travel operators all depend on confidence as much as cash. When consumers hesitate, the impact ripples outward, reshaping which businesses thrive and which struggle to keep pace.

Household Budgets Under Pressure

Mortgage renewals have become a defining stress point for many households. Even with policy rates easing, payments locked in at higher levels continue to crowd out discretionary room in monthly budgets. Dining out, live entertainment, and weekend travel are often the first to be scaled back.

Survey data underscores how widespread this pressure is. A recent BDC analysis found that nearly two-thirds of Canadian consumers reduced spending because of interest rate expectations, while more than 60% cited inflation as the primary reason. That combination has forced consumers to prioritise essentials over services.

For London-based businesses, this has translated into shorter booking windows and more price sensitivity. Customers still want experiences, but they are scrutinising menus, memberships, and add-ons more closely. The decision to spend hasn’t disappeared; it’s simply being delayed or downsized.

Winners And Losers In Services

Not all service categories are feeling the squeeze equally. Full-service dining and higher-ticket entertainment have faced more resistance, while quick-service food, local attractions, and flexible experiences have proven more resilient. Value, rather than volume, is increasingly the deciding factor.

Digital leisure has also crept into the mix as a lower-cost alternative to nights out. Streaming, mobile gaming, and regulated online entertainment platforms offer convenience and price transparency that appeal to budget-conscious consumers. For example, some of the online casinos reviewed by GamblingInsider allow players to start enjoying games with a minimum spend of just $10. This helps illustrate how online entertainment has become part of a broader leisure mix rather than a niche pursuit. For many households, the appeal lies in controlled spending and at-home convenience, not excess.

The flip side is that businesses reliant on impulse spending are finding fewer spontaneous customers. Advance planning and clear value propositions now matter more than foot traffic alone. Those unable to articulate why their service is worth the premium are seeing demand soften.

Digital Leisure Gains Ground

The rise of digital leisure doesn’t mean consumers have stopped spending altogether. Instead, they are reallocating budgets toward options that feel efficient and flexible. Subscriptions, pay-as-you-go services, and bundled offers align better with households managing fluctuating expenses.

There are also signs that overall consumption is more resilient than headlines suggest. According to an RBC Economics analysis, household consumption volume grew at a 2.5% annualised rate in the first half of last year, with per-capita spending up 2.4% year-on-year in the second quarter of 2025. That growth hints at pent-up demand waiting for the right conditions.

For local service providers, this creates a nuanced picture. Consumers are not uniformly retreating; they are selectively engaging. Businesses that combine physical experiences with digital touchpoints, whether through online booking, memberships, or complementary digital content, are better positioned to capture that spending.

What Business Owners Are Adjusting Now

Many London businesses are responding by rethinking pricing and packaging rather than cutting back entirely. Smaller portion options, off-peak discounts, and tiered memberships are becoming common tools to maintain engagement without eroding brand value.

Others are focusing on operational efficiency. Streamlined menus, smarter scheduling, and targeted marketing help protect margins when volumes fluctuate. The goal is to remain visible and relevant, even when customers are spending more cautiously.

The broader takeaway is that discretionary spending hasn’t vanished; it has evolved. London’s service economy is being reshaped by households balancing debt, value, and convenience. Businesses that recognise this shift and adapt thoughtfully are more likely to find stability, even as consumer habits continue to change.