You don’t need me to tell you that the pound in your pocket isn’t going as far these days, but it’s now official.
Not only does Scottish Friendly’s latest Disposable Income Index (DII) reveal that seven in ten UK households (70%) are worried about the impact rising inflation will have on their disposable household income in the next twelve months, the Office for National Statistics (ONS) has reported
the savings ratio – which measures the outgoings and incomings that affect households – fell to its lowest since the early 1960s.
Our latest index shows that around half of Brits are currently holding their breath and tightening their belts. We are expecting a bumpy ride thanks to the twin headwinds of Article 50 uncertainty and rising inflation and those households are proactively takin steps to ensure they are prepared for any outcome. I’d like to say it seems as though we are learning lessons from previous generations in times of uncertainty and are embracing a thrifty approach to spending or planning to find alternative ways to boost our income.
Scottish Friendly’s quarterly report has been compiled in conjunction with leading think-tank the Social Market Foundation and it shows that the median UK household has £1,029 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. The money left at the end of the month is set aside for other necessary items like clothing, furniture and savings as well as luxuries like holidays.
In the context of these economic concerns, around half (46%) of households are planning to cut back on spending with half of those (53%) saying they need extra money to cope with the cost of day to day living and 1 in 5 (21%) hoping to pay down existing debts. Households are also taking, or plan to take, a wide range of steps to reduce expenditure. Those planning to cut back intend to purchase cheaper groceries (67%), spend less on leisure and going out (57%), spend less on treats such as coffees (55%), look to get better deals on energy suppliers (36%) and are intending on going on cheaper holidays or not holidaying at all (36%).
Those who are being prudent in this way could be quids in if they keep this up. However this only paints part of the picture because we’re also flexing the plastic like it’s going out of business. Credit card borrowing is growing at its fastest rate in over a decade. If this goes on, those who are borrowing are in danger of stoking up financial difficulties for themselves in the future.
With a bit of cunning and good old British resolve we can do our best to beat the squeeze rather than let it suffocate us.