Households in the UK had more to spend in the first quarter of 2025, shows a recent report though spending power may come under pressure due to a range of policy changes.
According to a recent report by supermarket Asda, all UK households were £25 better off on average in the months up to March than in 2024, with an average disposable income of £257 per week after paying bills and spending on essentials.
London again enjoyed the highest disposable income after bills, averaging £334 per week, with the capital recording a £27 year-on-year improvement in the months up to March.
It is however no longer the only region surpassing its pre-crisis peak. The East Midlands, Scotland, and the North West have all seen their spending power exceed pre-pandemic levels.
The improvements seen across regions is due to lower inflation compared to the same period last year. This has helped slow the growth of essential spending to 3.5 per cent in Q1 2025, down from 4.7 per cent in Q1 2024.
Inflation has consistently slowed throughout the first quarter, dropping to 2.6 per cent in March. The slowdown in price growth was primarily driven by falling fuel prices, with both petrol and diesel seeing significant declines.
Although households had more to spend as a result of inflation easing, annual gross income growth did slow across nearly all UK regions in the three months ending in March, reflecting the impact of a cooling job market.
The tracker shows that earnings growth slowed to 5.6 per cent, down slightly from 5.7 per cent during the same period last year, with the North East, Wales, and London experiencing the largest year-on-year declines in gross income growth.
Cebr, who compile the tracker, project that spending power of households may however come under pressure in the coming months, due to the cooling job market, higher utility bills and cuts to welfare spending.
Reacting to this month’s Income Tracker, Charlie Cornes, Senior Economist at Cebr, said, “The Income Tracker grew in the first quarter of the year, though at a slower pace than the previous quarter. In the months ahead, spending power may come under pressure due to a range of policy changes.
“Higher utility bills, cuts to welfare spending, and rising employer costs are all likely to impact consumers. However, these impacts are expected to be partially offset by continued income growth, as wages are projected to rise faster than headline inflation for the remainder of the year.”
