Squeezed households to cut back on Christmas

Stephan Shakespeare
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WITH experts increasingly predicting tougher economic times ahead now seems a good time to look at the public’s economic confidence from YouGov’s HEAT report. The October results show confidence about household finances remaining very low with 46 per cent expecting theirs to be worse in 12 months versus 15 per cent expecting an improvement.

This pessimism is largely driven by cash positions – 28 per cent of UK households had just £125 or less available in discretionary income after paying utilities, housing, and tax last month. This is up from 21 per cent last year.

This cash crunch is affecting all Britons as incomes fail to keep pace with inflation. Among those households making less than £30,000, 42 per cent have less cash available this month than last with only seven per cent seeing more available. Among top earning households with over £50,000 in income, 25 per cent report less cash available versus 13 per cent with an increase.

All income groups expect the crunch to continue. Of households with £50k+ in income, 44 per cent expect cash available to decline in the coming 12 months, versus only 16 per cent expecting an increase. Among less well-off households (less than £30k income), the crunch is more severe, with 49 per cent expecting a decrease while 13 per cent expect an increase.

This reduction in disposable income is likely to manifest itself under the Christmas tree. Two fifths of households are planning to decrease their spending on gifts this year, with only seven per cent increasing. The cuts are consistent across all incomes and demographics and are also seen in the US, where 42 per cent expect spending to decrease this holiday compared to 10 per cent increasing. After a difficult year for retailers it does not look like Christmas will bring much cheer.