Improving signs not yet enough to lessen household squeeze

2nd April 2024

While some indicators have shown small positive signs of improvement, these are not yet at the point where they can decrease the financial pressures on many UK households.

Increasing wages and falling inflation bring some welcome indications of improvement for the UK’s economic outlook this month, but neither are yet significant, or long-lasting, enough to be fully impacting upon UK households yet. In November 2023 to January 2024, regular pay increased by 6.1% compared to the year previous, while the rate of inflation reduced by 0.6% in the year to February 2024 on a downward trend.

However, signs of pressure on all sorts of households are not hard to find. In January 2024, the charity StepChange reported that 43% of their clients, those being supported by the charity within their situation of debt, were in full-time employment. Situations of people struggling to make ends meet, even when working as much as they can, are often exacerbated by surrounding cost factors. For example, for those with children, the average cost of sending a child under 2 to nursery full-time (50 hours per week) equates to £14,030 a year, £269.86 a week.

Housing costs are also problematic across the board, with high rents averaging 26% of the median monthly income in England, rising to 35% in London. While the increasing burden of mortgages, with the proportion of mortgages in arrears over 1.5% increasing by 21% at the end of Q4 2023 from a year prior, is placing heavy strain on those households. The average first-time buyer deposit in December 2023 was around 130.6% of the average UK annual salary of £45,154.

These challenges are affecting people of all ages too, with the percentage of pensioners classed as “in material deprivation” during 2022-23 at 8%, its first increase since 2014. With pension-age people increasingly opting to remain in the workforce, an increase of 49,000 in Q4 2023 compared to one year before, the cost of living squeezes are being felt across all generations.

Signs of positive improvements for the UK’s money are always incredibly welcome, particularly in our recent challenging times where for so long, the indicators have usually painted a troubling cycle of financial problems. But what is urgently needed is for any positive movements to now continue, month-on-month, for a significant period, such that they start to have their fullest effect on struggling UK households.

Core to the Financial Wellbeing work we do across all sorts of UK communities every day is the principle of practical, robust and honest budgeting; people assessing and appraising their income and expenditure columns and looking to balance those as best they can. Recent times have generally seen that expenditure column being the one constantly adjusted ever upwards. A sustained period of that income side seeing the increases should play an important part in a marked improvement for the UK’s Financial Wellbeing.

Michelle Highman, Chief Executive of The Money Charity