UK consumer spending falling rapidly

July 6th, 2008

Research by Ernst and Young has revealed that
UK consumer spending power has fallen dramatically because of the rising cost of living. The average household is 15% worse off than it was five years ago, the Annual Discretionary Income Study says.

After household bills and tax, it found the typical family had less than 20% of its gross income remaining, compared with 28% in 2003. It added that rate rises and fuel bills meant “the worst could be yet to come”.

The comments came after Marks & Spencer warned of falling sales as customers turned to cheaper options, especially in food.

Meanwhile John Lewis sales fell 8.3% during the week to June 28 compared to the previous year, led by hefty drops in home and electrical goods sales, with its out-of-town stores being hardest hit.

The Ernst & Young report said that monthly discretionary income for a typical household was now £772.79 – compared with £909.84 in 2003/04.

And with higher interest rates and a growth in the amount people are borrowing to buy property – average monthly mortgage payments are just under £735, 78% higher than in 2003/04. On top of this credit card bills and UK debt consolidation loans have lead to a descrease in disposable income.

But the report also said that increased competition had brought down the cost of fixed line telephone costs while lower servicing charges and tyre costs had reduced the cost of car upkeep.

However, the bleakest tone of the report is saved for the near-term future. If, as predicted, utility prices rise by as much as 40% later this year and interest rates are increased to control rising inflation, consumers and consumer facing businesses will face even bleaker times.

This entry was posted on Sunday, July 6th, 2008 at 5:37 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

UK consumer spending falling rapidly

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