More than four in ten Brits say they are worse off than 12 months ago
The latest Disposable Income Index published today by ISA provider Scottish Friendly reveals that many Brits are curbing spending on ‘big ticket’ items as economic anxieties reign. A third of households (33 per cent) say they have delayed expensive purchases of cars, home improvements or TVs in the last 12 months. The majority (79 per cent) of these respondents say they don’t have enough money to cover the cost. However, one in five (20 per cent) cited uncertainty over prices as the main factor for postponing a purchase.
The quarterly report, compiled in conjunction with leading think-tank the Social Market Foundation, shows that the median UK household has £1,078 left each month after paying for absolute essentials of housing, energy, water and a broader basket of goods including groceries, transport, childcare and broadband internet. These goods are required to play a full role in modern society. Money left at the end of the month is available for other key items like clothing, furniture and savings as well as luxuries like holidays.
Inflation outpacing wage rises for the second quarter in a row is putting additional pressure on households’ disposable income as the latest figures from the ONS show. More than four in ten (42 per cent) people say they are worse off than 12 months ago as the cost of living rises. Meanwhile, eight in ten (82 per cent) households say their financial situation isn’t improving and just over a third (35 per cent) believe they will be better off in 12 months’ time.
As a result, the pay squeeze on household finances has hindered the growth in domestic consumption in the last quarter which has been the principal driver of economic growth in recent years. In the period between April and June 2017, household spending increased by just 0.1 per cent), which is half the rate for the first quarter. Meanwhile the Society of Motor Manufacturers and Traders (SMMT) is forecasting a decline in new car registrations in 2017 and into 2018.
The index also reveals it is younger people who are most worried about their debt and their ability to cope with an unexpected bill. Over half (53 per cent) of millennials (those born between 1981 and 1998) are anxious about debt, while 70 per cent) of those aged between 25-34 are concerned about their ability to cover a big unplanned expenditure. Overall nearly four in ten (38 per cent) British households are anxious about the amount of money they owe.
The index also reveals a significant difference between the spending habits of millennials compared to older generations. 39 per cent per cent of millennials have delayed the purchase of a big-ticket item in the last 12 months compared to just 29 per cent) of Baby Boomers.