Households in UK better off than a year ago: Ernst & Young

20 June 2009

According to an Ernst & Young survey, families in UK that have not been affected by job losses have enjoyed a 25 per cent increase in spending money over the past year after mortgage costs and energy bills dropped.

The average UK household income of families that did not suffer job losses rose by £200 a month, the business consulting firm says in a report. Homeowners benefited with the Bank of England cutting the key rate to a record low level of 0.5 per cent that helped curb mortgage costs. Gasoline, gas and electricity bills also fell sharply it says.

Rising unemployment and the worst recession in a generation will likely encourage people to pay back their debt as they cut spending from their disposable wealth in the shops according to the report. Meanwhile, according to the Office for National Statistics UK retail sales for May have unexpectedly dropped for the first time in three months.

The average UK household has a higher percentage of its gross income left after paying bills as compared with last year. The £1,075 that the household has left to spend after paying bills amounts to 27 per cent of gross income as compared with 22 per cent last year.

Unemployment is at the highest since 1996 in the quarter through April and the Confederation of British Industry has predicted the up to 3 million consumers would likely be out of work by middle 2010.

With average monthly mortgage repayments down 20 per cent on last year households are saving 8 per cent in fixed monthly household costs.

Families that have continued to remain in work through the downturn have more than £200 a month more to spend the study says.