Disposable incomes in Britain have risen at the fastest pace in three years, although they still remain below a peak reached in 2021.
According to a recent research carried out by supermarket Asda and the consultancy Centre for Economics and Business Research, weekly disposable incomes have accelerated by 13.5 per cent over the past three months on an annual basis, the fastest pace since 2021.
The improvement in average household finances was driven by a marked slowdown in inflation and by strong nominal wages growth. According to the Office for National Statistics, inflation stabilised at the Bank of England’s 2 per cent target for a second month in a row in June, while average wages increased by 5.7 per cent.
However, despite the rise in disposable incomes, households are still reeling from the impact of rising living costs. According to Asda and CBER, weekly average nominal incomes hit £1,005 in June out of which £613 was spent on essential bills and a further £151 on taxes. After accounting for these costs, average weekly spending power was £240 last month, up by £2.73 from May but still less than £246 recorded in March 2021.
Sam Miley, managing economist and forecasting lead at the CEBR, said, “A second consecutive month of inflation being at target has helped to support household spending power, given that earnings growth is significantly stronger. Though inflation may pick up slightly in the coming months, it is still expected to fall short of income growth for some time. This means that improvements in spending power are set to continue, supporting consumption and the wider economy.”
Additionally, the recovery in real incomes in London has outpaced that of other regions in the UK. According to the latest Asda Income Tracker, average household disposable income in London rose to £351 per week in Q2 – 3.0 per cent up on the pre-pandemic peak of £340 in March 2021, thanks to above average wage growth in the capital.
This represents a significant uplift of £114 per week compared to the amount the average UK family is left with after paying bills and essentials, which stood at £237 per week during the quarter. Only two other regions, Scotland and East of England, had average household disposable incomes above the UK-wide average during the quarter at £238 and £261 per week, respectively.
Whilst these were the only regions to record values above the UK average, the tracker grew by 13.5 per cent on the year marking the strongest quarterly growth in three years. This was largely driven by sharp slowdown in inflation in the quarter, with easing financial pressure on UK households and all regions now reporting slowdown in the cost of essentials.
Simon Hannah
