Rising cost of essentials reducing living standards
Over the past 55 years, real household income has almost doubled and living standards have been transformed but the rising cost of essentials is squeezing consumers’ budgets.
New research, to mark the 55th anniversary of Which?, reveals consumer spending trends over the last six decades and looks ahead to what the future holds for hard pressed consumers.
In the 1960s the average UK household’s weekly income, before tax, was just £18 or £323 in today’s money. By 2010 however, the average household was earning £700 a week.
Living standards have similarly increased dramatically. In 1970, fewer than one in three houses had central heating, just a third of people had a telephone and 65% of people had a washing machine. By 2010, standards had changed with central heating in 96% of households, 87% of people owning a phone and almost all (96%) had a washing machine.
However these improvements in living standards are accompanied by rising food, energy, housing and transport costs. We found:
> In 2005, 8.7% of our budgets were spent on food but rising prices mean this has already risen to 9.6% in 2012 and is expected to rise to 10.3% by 2030;
> Recent increases in utility bills mean the percentage we spend on fuel bills is expected to rise from 4.3% in 2012, to 6.2% in 2030;
> Our homes are also costing us more – back in 1965 housing costs made up 14% of our total expenditure, nowadays they account for 24% of our budgets and could grow to more than 28% by 2030 because of rising rent costs and recovering house prices;
> The amount we have to spend on anything but essentials has also dropped to its lowest in over twenty years; and
> As consumers, we owe a total of £1.5 trillion, which puts debt at the highest level since the 1980s.
As housing costs hit a record high, food has also been increasing in price faster than inflation, which in turn is changing our shopping habits. A recent Which? survey* found 91% of people are buying cheaper groceries compared to 74% a year ago while 77% are shopping at discount supermarkets compared to 59% a year ago.
Interestingly our changing perception of what is essential means 43% of people would cut back on food if they had to, but fewer would give up broadband or mobile phones.
The current economic climate is affecting people’s saving and spending patterns too. The percentage of our income we saved fell to a record low of 3% by the end of the most recent economic boom in 2008, and while it has recovered to around 7%, the latest Which? Quarterly Consumer Report revealed 41% of people are planning to cut back on savings and investments in the next few months.
Which executive director Richard Lloyd said:
“With the economy still in recession, debt levels are rising and costs are set to increase, forcing consumers to make tough choices between the things we regard as essential right now, like broadband and phones, and the bare necessities such as housing, food and fuel.
“Which? wants to see confident consumers and strong businesses driving economic recovery, but the consumer has too often been an afterthought in the Government’s growth agenda.”
Notes for Editors:
1 The Which? Consumer trends article is based on data from a historical analysis of UK consumer trends since 1957, and a forecasting piece looking at trends to 2030. Which? commissioned the Centre for Economic and Business Research (CEBR) to conduct a quantitative analysis of existing historical data sets and the qualitative futures work was conducted as a collaboration between Which? and the sustainability think tank Forum for the Future.
2 You can view the latest Which? Quarterly Consumer Report here: http://www.which.co.uk/about-which/who-we-are/quarterly-consumer-reports/
3 Populus, on behalf of Which?, interviewed 2,100 GB adults online between 24th – 27th August 2012. Data were weighted to be demographically representative of all GB adults. Populus is a member of the British Polling Council and abides by its rules.
Press Release: Consumer, Economy, Energy, Food, Money, Personal Finance