UK household spending exceeded income by £25 billion in 2017, according to the latest official analysis (https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/articles/makingendsmeetarehouseholdslivingbeyondtheirmeans/2018-07-26?utm_source=govdelivery&utm_medium=email)
This means, on average, every household in the UK spent £900 more than they received in income
It is the first time spending has outstripped income since 1988
Unsurprisingly, those at the bottom of the income scale are most likely to fall into debt
Tom Selby, senior analyst at AJ Bell, comments:
“UK households were forced to fill a £25 billion black hole in their collective finances in 2017 as spending outstripped income for the first time in 30 years.
“Economic growth founded on rising debt is clearly not sustainable and if this continues into the long-term it would be profoundly worrying.
“One obvious reason for this is the interest rate environment we have experienced in recent years, encouraging people to borrow more and spend rather than save at the paltry rates offered through bank accounts and Cash ISAs.
“Households took out loans totalling £80 billion last year, while less than half this amount (£37 billion) was deposited in bank accounts – the lowest amount since 2011. Households also accumulated more debt than assets since records began.
“It’s notable, if unsurprising, that the biggest problem lies among those at the lower end of the income spectrum, the poorest 10% spending two and a half times their total income during 2017.
“Put this all together and you see the significant challenge policymakers have in boosting financially resilience in the UK.
“For those lucky enough to have some spare cash at the end of the month, investing in stocks and shares through pensions and ISAs has proven an attractive alternative as markets have soared in recent years.
“However, for people having to borrow to make ends meet, saving for the future might feel like a luxury they simply cannot afford.”