According to a new survey by Markit, a company providing financial information, almost 40% of households saw their finances deteriorate in August, compared to figures for July.
In fact, the study of 1,500 adults showed that household finances have worsened at a faster rate than at any time since February 2009, in the middle of the last recession. The main reason seems to be a large drop in take home pay, the sharpest for nine months, which has been compounded by a rise in prices. Indeed take home pay has now fallen for 11 consecutive months.
Conversely just 6% of households reported an improvement in their household finances.
Markit said that disposable cash available for households to spend fell at the fastest rate since the survey began and that savings fell at the fastest rate for two and a half years.
Tim Moore, senior economist at Markit, said: “Recent events have made a week seem a long time in economics and August’s survey is the first sign that the slew of downbeat headlines has knocked consumer sentiment.”
Experts suggest that there will be little respite for households as the Bank of England believes inflation will continue to rise to 5% on the back of higher energy, fuel and food prices.
This was confirmed by the survey which found that 49% of people said they expected their financial position to worsen over the next 12 months while just 27% anticipated an improvement.
North v South
Whilst all age groups, income categories and areas reported a worsening of their household finances there was a difference in how hard the north and south of England were hit. Households in the south east saw their household finances decline at the slowest rate whereas the three northern regions of England were worst affected.
Downbeat message confirmed
The gloomy picture was confirmed by two additional surveys by accountants ICAEW/Grant Thornton and the British Retail Consortium (BRC).
The ICAEW / Grant Thornton latest Business Confidence Monitor showed that business confidence has fallen to its lowest level since the third quarter of 2009 when the UK was still in recession.
The BRC’s most recent footfall survey, which measures the number of people visiting shops, showed a 1% fall in the past three months when compared to the same period last year.
Stephen Robertson, the BRC’s director general, said: “Fewer people are shopping because households are facing high inflation, low wage growth and uncertainty about future job prospects.”