UK Spending Power On the Up


February 2016

UK Spending Power On the Up

Figures from the Office for National Statistics show that the average level of disposable income per household in the UK went up by £1,500 between 2012/13 and 2014/25.

The increase is measured after the figures are adjusted for inflation and shows the median disposable income per household to be £25,700, just above its “pre-downturn value” of £25,400.

Household spending power is generally understood in terms of disposable income since in very general terms, if the latter is higher then so too is the former, though this is not always the case.

This latest boost is largely down to combination of average wages and improving rates of employment. Low inflation rates seen last year have also helped, improving the rate at which wages have gone up in relative terms

Inflation as measured by the Consumer Price Index has been particularly low recently, dropping to negative levels around September last year before coming back up to 0.1% in November and to 0.2% in December.

The latest figures show CPI inflation to be at 0.3% for January this year.

Mark Whittaker of the think-tank Resolution Foundation said: “Strong jobs growth and ultra-low inflation have finally pushed living standards back above where they were before the financial crisis.”

The figures showed that the difference between the rates at which households in various demographics have been recovering in terms of spending power following the financial crash.

The report showed that the average income among the richest fifth of households in the UK still remains more than 3% (£2,000) below its previous peak “after accounting for inflation and household composition”.

This particular demographic suffered worst following the crash according to the ONS, having experienced a drop of 7.9% from 2007-2013.

Those in the poorest fifth of households experienced no fall in average income following the crash and, according to the data, earn an average of £700, or 5.8%, more than they did in 2007/8, adjusted for inflation.

Retired households experienced the largest increase over the years, with their median income currently 7.7%, or £1,500, above their 2007/8 level, while non-retired households are still 3.1% worse off than that same year.

Mr Whittaker said: “the downturn has been felt very differently between generations, and across the UK.

“This generational divide opened up well before the financial crisis landed. As a result, typical working age families are no better off today than they were a decade ago, while typical pensioner incomes are 15% higher”

He did, however give something of a glimmer of hope for the future: “this divide is unlikely to widen in the coming years, but nor do we see any sign of narrowing. By 2020, pensioner incomes are set to be over a third higher than they were at the turn of the century – more than double the increase experienced by working-age households.”