UK households face cost of living squeeze as disposable income falls

Times

12 hours ago

British households have seen their disposable income fall by a third in the past three months as water and other bills climb alongside spending on essentials, figures from Moneysupermarket show.
The comparison site's latest household money index showed that the average person had £513.75 left on average each month between April and June after covering bills and outgoings, down from £682.27 in the previous quarter.
From April to June, the average Briton spent £52.14 a day to get by, the equivalent of £1,564.25 a month.
Moneysupermarket's index tracks consumer spending across 31 categories, including utilities, mortgages, insurance, subscriptions and groceries.
Lis Barton, chief customer officer of Mony Group, the parent company of the comparison site, said there had been 'movements up and down' across different categories of bills.
'Energy bills have eased off for many this summer, helped along by a lower price cap, milder weather and more fixed-rate deals on the table, offering a bit of breathing space in a still-volatile market. However, there are some bills that are more difficult to cut, like water and childcare costs.'
While energy bills and mortgage repayments fell by 9 per cent and 11 per cent respectively, those savings were outweighed by rising costs elsewhere.
Water bills rose by 11 per cent on average while the cost of broadband increased by 8 per cent to £42.70. Childcare and school costs rose by 10 per cent and health insurance jumped by 22 per cent. Gym memberships rose by 21 per cent.
Essential spending caused a significant squeeze on personal finances, rising to 75 per cent of monthly income compared with 69 per cent from January to March.
Official figures from the Office for National Statistics showed last week that inflation rose by 3.6 per cent in June, the highest since January last year. Food costs remained a key driver, with butter and beef prices increasing by more than 20 per cent year-on-year.
Despite this squeeze, many households continued spending on non-essentials, with TV streaming up by 25 per cent, gym memberships up 21 per cent and gaming up 28 per cent.
Barton, who advises switching to secure the best deal, said: 'We would definitely expect to see people prioritising essential spending over discretionary purchases over the coming months and continuing to find savings where they can.'
New data from Deloitte shows that consumer confidence dropped by 2.6 percentage points in the second quarter to -10.4 per cent, the first significant fall since October 2022 when inflation hit a 41-year high of 11.1 per cent. It also marks the lowest level since the first quarter of 2024.
The decline affected all six measures tracked by Deloitte's 'consumer tracker', based on responses from 3,200 UK consumers last month.
Sentiment around job security recorded the sharpest fall, down by 4.8 percentage points. Confidence in job opportunities and career progression also dropped, by 3.9 points, reflecting rising employer costs and signs of a weakening labour market.
Céline Fenech, consumer insight lead at Deloitte, said: 'After recovering from its lowest level on record in the third quarter of 2022, when inflation peaked to a historic high, our consumer confidence index has declined for the first time in almost three years.
'This drop in confidence signals a weakening of consumers' resilience, as concerns of a slowing labour market have left consumers worried about job security and income growth prospects, while persistent inflation and a high cost of living have negatively impacted sentiment towards personal debt,' she added.
'However, we have seen how the mood of the consumer can change and adapt to new circumstances. If an uptick in both economic growth and business sentiment reduces pressures on the job market and on earnings, a return to positive confidence could still be on the cards.'