LONDON: The Annual Discretionary Income Study published by accountants Ernst & Young claims the average UK household is 15% worse off than in 2003. The result? Consumer spending power has fallen "dramatically".
The beancounters attribute this to a large rise in the cost of living which, after paying household bills and tax, leaves a typical family with less than twenty per cent of its gross income - compared with 28% residual income five years ago
According to E&Y director of retail Jason Gordon: "Many UK consumer segments are clearly feeling the pinch as big rises in household costs are far outstripping relatively modest wage inflation.
"The significant decline in discretionary income means consumers are no longer in a position to spend as freely as they have done in the past."
Other findings in the E&Y report include:
- Fixed monthly household costs have risen by almost 45% since 2003/04.
- Petrol costs for a typical household are £193.61 per month - 29.4% higher than in 2003/04.
- Average monthly energy bills have risen by 110% since 2003/04 to £95.80.
- Council tax is up almost 25% since 2003/04, to £114.50 monthly for a Band D* property.
(*Tax base £68K-£88K based on 1991 valuations.)
Still in Cassandra mode, Gordon continued: "All consumers are painfully aware of the huge hikes in petrol and utility bills but we've also seen some fairly hefty price increases in pension contributions and debt repayments.
"If we go one step further and factor in food price inflation it's clear that household budgets are under enormous strain. Add in the impact of falling house prices on the consumer's propensity to spend, and the consumer economy is undoubtedly on a knife-edge.
"Worryingly, though, the worst could be yet to come. 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."
Data sourced from BBC Online (UK); additional content by WARC staff