UK households cut £106 a week during the pandemic with lowest earners hit hardest
UK households cut back on average £106.40 a week during the first year of the pandemic, with the lowest earners being hit the hardest.
Average weekly expenditure for all households dropped from £587.90 to £481.50 in the year to March 2021, according to fresh data from the Office for National Statistics (ONS).
The 18% drop in spending exceeds any year-on-year decrease throughout the 2008 economic downturn and subsequent recovery, which averaged only 2%.
Across all income brackets, the biggest chunks of spending were on housing, fuel and power (18%), food and non-alcoholic drinks (14%), and transport (13%).
“Those on lower incomes and renters spend a huge proportion of their income on the essentials, so at the peak of the pandemic, they saw their spending fall far less spectacularly than those on higher incomes. It demonstrates the enormity of the challenge they face today,” Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.
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"The pandemic meant we slashed spending on luxuries, like hotels, restaurants, recreation and culture. Higher earners spend a bigger chunk of their income on these things, so when they cut out this spending, their outgoings fell twice as far as they did for lower earners.
"Now that prices are on the rise, it means higher earners can cut back far more easily by easing off on the luxuries,” she added.
Private renters continued to spend the most on housing and fuel and power in the financial year ending 2021. People who rent unfurnished and furnished homes spent £192.70 and £261.80 per week, respectively, compared with £48.20 spent by those who own their homes outright.
"Lower earners, meanwhile, have eye-watering costs for the essentials. The cost of housing, fuel and power is £81.80 for the second fifth of low earners, compared to £73.30 overall," Coles said.
"They actually spend more than most of those earning more than them. This may well be because they’re more likely to be in private rental accommodation — which typically is less energy efficient than properties lived in by their owners, and more of them will be on pre-payment meters, which charge more for energy.”
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"As a result, lower earners spend almost a third of their income on housing, fuel and power (18%) and food and non-alcoholic drinks (14%). It’s far harder to cut back on these things, because once you‘ve shopped around as much as humanly possible, you’re left with some really horrible decisions.
"And all of these figures come from March 2021, well before the enormous price hikes kicked in, and a full year before the horrendous energy price cap hike. In the intervening period, life has become far tougher for us all."
Spending on food and non-alcoholic drinks increased by 9% or £5.50 per week in the year to March 2021.