Our clients are often interested in how their household spending compares to others. Do they spend more than their neighbours, about the same, or less? This financial curiosity has been satisfied with the publication of new official figures reporting on household spending across the UK.
The latest Family Spending Survey from the Office for National Statistics (ONS) offers an insight into the spending habits of UK households, broken down by household characteristics and types of spending. At a headline level, it shows that average weekly spending is up to £572.60 for the year ending March 2018. This is the highest level of weekly spending since 2005, when adjusted for inflation.
According to the ONS, this rise in UK household spending is correlated with an improvement in the employment rate, which reached a record high of 75.6% in the first quarter of last year.
The ONS reports that the biggest outlay for households was transport. The average household is now shelling out £80.80 a week on its transport costs. A further £76.10 per week was spent on average on housing costs, fuel and power. This was followed by an average of £74.60 a week on recreation and culture.
In addition to spending habits, the report also looks at how much we are saving. It found that our savings ratio has fallen to its lowest level since records began, to just 3.9%. Such a low savings ratio suggests that households are dipping into their savings, and even taking on new debt, in order to spend more and keep up with their lifestyle costs.
Looking at spending habits across different parts of the UK, the ONS report found some interesting differences. Perhaps unsurprisingly, London households are spending the most each week with an average weekly spend of £658.30 in the City. Other parts of the country to report above average levels of weekly spending were the South East, South West and East of England.
In contrast, the lowest average spending was reported in the North East of England, where households were spending an average of £457.50 each week. There was also below average spending in Scotland, Northern Ireland and Wales, at £492.20, £488.50 and £470.40 a week on average respectively.
Another trend identified in the report was less of an outlay on alcoholic drinks. It’s not the first time the ONS has spotted this downward trend. Households are now spending an average of just £8 a week on alcohol. A decade earlier, this figure was £10.90 a week, when adjusted for price inflation. More is being spent on food and non-alcoholic drinks compared to a year earlier; £60.60 a week now compared with £58 a week (inflation adjusted) back in 2008.
Commenting on the figures, Helen Morrissey, pension specialist at Royal London, pointed out they represent a home maintenance time bomb for the over 50s. She said:
“Today’s figures show that just because people may have paid off their mortgage it doesn’t mean they stop spending on their house and many are facing a home maintenance time bomb.
“The stats show almost a quarter of all housing expenditure in households headed by people aged between 50-74 was on alterations and improvements such as central heating installations and double glazing. This figure is much higher than the average for all households which is more like 14%.
“It demonstrates the importance of having the necessary savings to meet these sizeable and often unexpected expenses for those approaching and in retirement. Being unable to meet these expenses as we get older can lead to people being forced to move from much loved homes because they no longer meet their needs.”
Of course, how you allocate your own household spending each week is likely to vary from these national averages. What matters is that expenditure is intentional and forms part of your overall financial planning, helping you to achieve and maintain your desired lifestyle.
At Wells Gibson we put your life at the centre of our conversations and design a Wealth Plan which makes it easier for you to visualise and achieve the life you want; answers your big questions and helps you prepare for your life’s transitions; and gives you the greatest chance of a successful investment outcome and fulfilled life from the money you have and will have.