Interactive Investor

Household spending well below pre-pandemic levels

31st May 2023 10:46

by Myron Jobson from interactive investor

Share on

interactive investor comments on ONS family spending figures in the UK for the financial year ending 2022.

Purse and coins 600

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Household spending in the financial year ending 2022 remained well below pre-pandemic levels, which suggests that many households watched every penny and every pound as runaway inflation gained momentum.

“It has been a case of out of the frying pan and into the fire for many people following the pandemic. Those who managed to weather the Covid financial storm have been buffeted by price rises in seemingly every area of expenditure, from the food we put on our tables to the amount we spend to heat our homes. Many households have stretched their budget to keep on top of rising prices, with little to spare for nice-to-have quality of life boosting purchases.

“The cost-of-living experiences are polarised between the ‘haves’ and ‘have nots’. In the financial year ending 2022, the average disposable income was six times greater in the richest fifth of households than the poorest fifth of households (£811.20 and £329.80, respectively). The lowest-earning households continued to spend the greatest proportion on essential spending such rents and energy.

“The nation’s financial resilience remains on a knife-edge. With wages failing to keep pace with runaway inflation and the lockdown savings well running dry for many Covid ‘accidental savers’, the number of people struggling to keep up with bills could rise even further. The most recent Bank of England Credit Conditions Survey revealed that banks predict that more and more people who have relied on the plastic and other forms of debt to make ends meet amid the cost-of-living crisis will reach financial breaking point in the coming months.

“It has been a tough couple of years for households, during which inflation has accelerated to levels not seen since the 1970s. We calculate that the UK lost £153 billion to inflation over a two-year period to March 2023, averaging £5,455 per household*, as price rises across key areas of household expenditure robbed Britons of purchasing power. While Britain appears to be past the worst phase of the biggest spike in inflation in generations, the road back to normal is a long, winding and uncertain one. As such, many of us will remain in budgeting mode as heightened costs continue to weigh on household budgets.”

*The figures were calculated by applying inflation to the latest ONS household spending data, to March 2021. interactive investor then projected household spending over the past two years using Consumer Price Index (including owner occupiers housing costs) over a two-year period to calculate how much household spending has risen with inflation to the end of March 2023.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox