Five years into the recession - and still five years to go?
Do you remember the halcyon days of 2008 when everyone had so much money they didn’t know what to do with it? Despite George’s claims to the contrary, a new report by Asda and the Centre for Economics and Business Research (CEBR) suggests that UK households will be £1,300 a year worse off in real terms in 2018 than in 2009 owing to rising costs, stagnating pay and austerity measures impinging on discretionary income.
For the past five years, Asda has produced a monthly Income Tracker, which measures the change in ‘discretionary income’ - how much families have left to spend each week after paying for essentials like energy, food and housing costs. Now they have produced a report which not only looks back over the last five years, but also predicts how things will look in another five years time, in 2018.
The figures show that, on average, we are £868 a year worse off in 2013 than we were in 2008, and that this will rise to £1,300 worse off in real terms by 2018.
Over the next five years the average UK household is expected to spend £3,900 a year more on essential items – like housing and utilities (up £652 a year by 2018), transport (up £663 a year by 2018) and mortgage interest (up £599 a year by 2018)- than they do today, with slow income growth and inflation making the pinch. Price inflation on essential items is expected to outstrip pay every month until 2018, and although disposal income is expected to remain stagnant at around £160 a month over this period, inflationary increases on discretionary spend will mean the real terms value of disposable income will continue to fall.
However, there is some regional variation and differences depending on your age and family circumstances. In 2018, pensioners (who are somewhat protected by inflation-clad pensions) and the well-off will end up better off than they are today, while low-income earners and single-parent families will be proportionately worst off. Youngsters under 30 will bear the brunt of the increased recession costs, with this group already being £200 a month down on 2008, and a further £200 a month drop in income anticipated by 2018.
Asda CEO Andy Clarke says: “Looking ahead to the next five years, one thing is clear: it’s going to remain incredibly tough for consumers. While the economy may be on the road to recovery the economic reality for them is very different depending on where you live and your age.”