With the Budget looming closer, our research reveals that the average household has slashed over £12,000 from their spending since the financial crisis. Will the Budget bring relief to struggling Brits?
The financial crisis and Britain’s struggling economy isn’t new to any of us, but it’s still shocking to see at just how much the average household has had to button down on spending. According to our own research, we’re spending £3,150 less a year since 2007. In all, we estimate that there’s been a £220bn loss to the economy since the beginning of the financial crisis.
Cutting back in the UK
There’s no question that times are tough and incomes are being squeezed, particularly the nine million who have had to cut back on essential spending (and that’s the real essentials) including food, housing and heating.
Worryingly, we also found that more than two million households have defaulted on a housing or bill payment in the last two months. I find this hugely concerning, not only from a financial point of view, but also just thinking about the stress and worry that these households must be facing on a day-to-day basis.
The wider effect on the economy
The other side of the coin is the effect this personal cutting back is having on a wider scale. With consumers feeling the squeeze and spending less on discretionary, non-essential goods and services in particular, this leaves a huge hole in the economy.
Take eating out as an example. When times are tight the odd meal out is one of the easiest things to sacrifice. This has translated into a £13bn cut in spending on eating out since 2007. Perhaps unsurprisingly, this has coincided with 90,000 fewer people being employed in the restaurant and catering industry.
This is something I hope George Osborne will keep in mind in his 2013 Budget. As our executive director Richard Lloyd said this weekend; ‘The UK has never before come out of recession without an increase in consumer spending, so it is critical that the Chancellor puts consumers at the heart of his plans for a return to growth.’
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