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UK households curb spending on 'big ticket' items as wage growth stagnates, anxieties over debt remain and economic uncertainty reigns

  • A third of households (33%) report delaying the purchase of a ‘big ticket’ item in the last year
  • More than four in ten (42%) Brits say they are worse off than 12 months ago
  • Median UK household has £1,078 left each month after paying for essentials

The latest Disposable Income Index (DII) 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%) say they have delayed expensive purchases of cars, home improvements or TVs in the last 12 months. The majority (79%) of these respondents say they don’t have enough money to cover the cost. However, one in five (20%) 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%) people say they are worse off than 12 months ago as the cost of living rises. Meanwhile, eight in ten (82%) households say their financial situation isn’t improving and just over a third (35%) 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%, 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%) of millennials (those born between 1981 and 1998) are anxious about debt, while 70% of those aged between 25-34 are concerned about their ability to cover a big unplanned expenditure. Overall nearly four in ten (38%) 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 of millennials have delayed the purchase of a big-ticket item in the last 12 months compared to just 29% of Baby Boomers.

Calum Bennie, savings expert at Scottish Friendly, says:

We seem to be stuck in a rut of economic uncertainty. The country is anticipating the outcome of Brexit negotiations and the impact this will have on the wider UK economy. Employment levels are continuing to rise (75.1%). However, this is tempered by the reality that stagnation in wages coupled with creeping inflation is leaving many households needing to do more with less money in real terms. As a result, anxiety about finances and debt levels looks to be on the increase and sadly it’s younger people who are feeling the pinch more than most.

Bennie continues:

Little wonder then that many of us are deferring purchasing big ticket items as we wait to see if the financial situation will improve. As purse strings tighten in homes up and down the country the cumulative impact is already having a dampening effect on the UK economy and pessimism around the prospects for our personal finances is taking root.

Bennie concludes:

In this kind of environment it’s vital that people make smart decisions when it comes to spending, borrowing and, most importantly, saving. Making your money work harder will help ease the pressure on households’ disposable income and getting the best deals when it comes to buying, selling or saving and investing should be top of mind.

Data appendix:

  Income after housing costs Income after essentials Proportion spending more than income on housing costs Proportion spending more than income on essential costs
Region

Scotland

£1,502

£1,158

6%

13%

Northern Ireland

£1,459

£870

8%

19%

Wales

£1,391

£967

9%

18%

South West

£1,411

£1,073

5%

14%

West Midlands

£1,307

£952

4%

10%

North West

£1,322

£976

3%

10%

North East

£1,159

£844

5%

10%

Yorkshire

£1,557

£1,164

5%

10%

East Midlands

£1,442

£1,123

2%

7%

East England

£1,487

£1,135

7%

12%

South East

£1,431

£1,045

9%

14%

London

£1,683

£1,316

12%

17%

Age Group

18-24

£964

£594

17%

27%

25-34

£1,624

£1,205

10%

16%

35-44

£1,415

£991

5%

12%

45-54

£1,317

£952

5%

13%

55-64

£1,410

£1,084

4%

10%

65+

£1,807

£1,447

2%

3%

Employment Status

Employed full-time

£1,591

£1,172

7%

12%

Employed part-time

£1,126

£682

9%

20%

Self-employed

£1,538

£1,267

5%

10%

Unemployed

£906

£621

9%

18%

Student

£670

£484

18%

31%

Retired

£1,807

£1,478

1%

4%

UK Median

 

£1,430

£1,078

6%

12%

Download a PDF of this press release here