Research highlights UK divide in household spending

New research from PwC highlights the disparity in household spending power across the UK, with some neighbouring towns and local authorities having significant gaps in disposable income.

The research shows the scale of the North-South divide in household spending power, with every northern region of England falling below the UK average while households in London and the South East have significantly more disposable income.

Households in the North East have spending power 6.6% below the UK average, equivalent to £1,542 less a year, while those in the North West are 6.4% below average, a shortfall of £1,493 annually. The East and West Midlands also fall below the UK benchmark. By contrast, households in the South East have spending power 9.0% above the UK average, worth an additional £2,154 a year.

London has the strongest gross household income position at £68,856, 20.4% above the national average of £57,192. However, London’s higher housing costs and larger households narrow that advantage and reduce household spending power after tax by £43,602 (63%) to £25,254 per year, only 8.1% above the national average of £23,376, or £1,883 more per year.

In the South West and Scotland, lower housing costs and smaller household sizes boost spending power above what gross income alone might suggest. In the South West, gross household income is only 1.1% above the UK average, but spending power is 3.8% above average, an extra £892 a year. Scotland starts with gross household income 5.5% below the UK average, but lower housing costs and smaller households more than offset this, leaving spending power 0.8% above average, or £175 more a year.

The report also measures non-financial factors affecting quality of life across the UK, based on approximately 50 local indicators that include access to healthcare, green space, housing, and safety. When combined with regional household spending power, the findings broadly reinforce the North-South divide. However, London drops from second to seventh place in the rankings of UK regions and nations, while Scotland rises from fifth to second. London’s positioning is particularly impacted by measures including financial vulnerability, housing pressures, safety, social connectivity and environmental conditions.

London’s overall economic strength masks significant differences in household spending power between boroughs, with no clear inner-outer London divide. While income remains a key factor in household finances, housing costs and household size mean spending power can vary widely across the capital.

This disparity is clear in two neighbouring boroughs: Richmond upon Thames and Hammersmith and Fulham. Annual household spending power in Richmond upon Thames, the highest in London, is £35,448, which is 93% higher than the £18,384 recorded in Hammersmith and Fulham, the lowest in London, equivalent to an extra £17,064 per year. Hammersmith and Fulham’s high housing costs and low household incomes, due to many single households, are the main reasons for the borough having such low household spending power.

Overall, 14 London boroughs including Tower Hamlets, Newham and Barking and Dagenham fall below the average household spending power across the UK, while 9 boroughs including Kingston upon Thames, Bromley and Wandsworth have household spending power at least 20% above the UK national average.

Rachel Taylor, Government and Health Industries Leader at PwC UK, said “The research shows just how differently prosperity is experienced across the UK, with stark variations not only between regions but on each other’s doorstep. The better we understand what drives those differences, the more precisely we can tackle them. Delivering good growth in every postcode will require local leaders to have the flexibility to focus resources where they can make the biggest difference.”

The contrast between Slough and neighbouring Windsor and Maidenhead is particularly striking. Slough has the lowest household spending power in the South East, and the second lowest across the UK. By contract, Windsor and Maidenhead has the highest household spending power across the whole of the UK, 110% higher than Slough, equating to an extra £19,812 per year.

According to the report, households in Slough face greater difficulty managing day-to-day finances, with limited savings and higher debt, while poorer mental health weighs on the area’s health score. Housing is another pressure, particularly around home ownership and household size. Immediately next door, Windsor and Maidenhead performs well above the regional average on health, supported by stronger mental wellbeing, and leads the region on housing, where the ability to meet housing costs makes an important positive contribution.

Beyond the regional picture, the analysis shows people in more rural areas tend to report higher life satisfaction and better mental and physical health than those in more urban areas. But within rural areas, places with stronger links to major towns and cities perform better, suggesting that these communities can combine the wellbeing benefits of rural living with access to jobs, services, transport and wider economic opportunity.

Just over half of places combine stronger household spending power with positive social and environmental outcomes. However, for 12.5 million households, or around 46% of the UK population, economic growth is translating less effectively into a better quality of life.

Taylor concluded “Our research shows how widespread the opportunity is to strengthen the link between economic progress and everyday life. Poorer mental and physical health, financial insecurity and housing pressures often weigh on lower-performing places, while stronger health outcomes and greater financial resilience support better performance elsewhere. The opportunity now is making growth count by ensuring it is not only generated in more places, but felt by more people.”