Residents in the capital take home over a third (39%) more than other regions in Britain, but when it comes to household consumption – excluding housing costs – they spend 7% below the nation’s mean amount, according to the Institute for Fiscal Studies (IFS).
This was mostly due to Londoners being forced to lower their budgets because of the amount they have to spend on rent or mortgages.
In 2024, the average cost per month for rent in the capital city stood at £2,121 per month, after a 10% rise in a year, separate Office for National Statistics (ONS) data found. Since 1 April, first-time buyers in London will also have to fork out £6,000 more on their stamp duty after the Government’s tax changes.
In terms of areas within London, Islington and Tower Hamlets residents were in the top 10% of income earned per person in the UK, but ranked in the lowest 5% in money spent after housing costs were factored in.
Despite having an average salary of £49,455, Londoners were fourth in the list of the biggest spenders when housing costs were considered.
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The city was behind residents in the South East, South West and East of England, and residents of the capital city also spent just 2% above the British average, despite the higher salaries found there.
In the UK, higher earners in the top 10% had incomes worth 65% more than those below the median, but spending distribution was just 35%, meaning the gap in living standards “may be less extreme” than the figures show, the IFS noted.
Meanwhile, a separate living standards study by the IFS showed the weekly average spend of Londoners, sitting at £407, was more than twice those in other cities. In Leicester, residents spent £190 on living costs, excluding housing.
‘People care deeply about regional inequalities’
Gautam Vyas, research economist at the IFS, said: “People care deeply about regional inequalities, but rankings of living standards across areas depend greatly on how you measure them.
“Our findings challenge the conventional wisdom that the typical London household enjoys higher living standards than their counterparts across the country. Rather, it seems that a combination of higher housing costs and differences in saving behaviour implies that high incomes do not translate into higher consumption spending for Londoners.”
