Real household income continues to drop, finds ONS
The decline comes in spite of an increase in gross domestic product per head (up 0.9% year on year) and in net national disposable income (up 2% year-on-year).
This was the fourth consecutive quarter that disposable income per head has decreased – the longest period of consistent negative growth since the end of 2011. Also, for the first time in two years, consumers reported a worsening of their perception of their own financial situation.
The ONS said that disposable income per head is usually a better representation than GDP of the income available to all residents in the UK to spend or save. Despite recent falls, disposable income per head still remains 3.2% above its pre-economic downturn level.
Jane Goodland, responsible business director at Old Mutual Wealth, said: “The current UK population are increasingly having to tighten their purse strings and they are feeling the pressure of doing so…This decline is beginning to impact people’s perceptions as, for the first time in two years, consumers reported a worsening of their perception of their own financial situation.
“The population’s view of their ability to afford their lives is crucial to their well-being and indeed their saving habits. Our research of 30-45 year olds found that 90% have not started planning how they will fund their retirement and 74% of this age group aren’t saving because they can’t afford it. Some segments are worse than others, with 84% of the self-employed in this age group saying they don’t have enough income to set any aside.
“This picture is worrying, but our research also showed that those in this generation with a financial plan were significantly more optimistic about their financial security.”