Economy on the mend but families still feeling squeezed
The first Lloyds Bank Family Finances report reveals the disconnect between the positive economic outlook and how Britain’s families are continuing to feel financially squeezed.
More than a third of Britain’s families (38%) only just meet their monthly outgoings, and a further 8% don’t have enough income to meet their regular financial commitments. In addition, of those surveyed, over four in ten (43%) were not positive about their own personal finances for 2014. Although there has been some improvement since January 2013 when 50% responded negatively, there is still a long way to go before the vast majority of Britain’s families feel positive about their financial situation.
In the three months to December 2013 GDP grew by 0.7%, in January, inflation levels fell below the Bank of England's 2% target rate for the first time in more than four years, and the number of people out of work reduced by 180,000 in the 12 months to December 2013. In addition, the 12 months to January 2014 saw average house prices increase by over £12,500, giving people more equity in their homes. Despite positive trends for the wider economy the Lloyds Bank Family Finances report tells a different story.
Household spending is still tight
In January 2014 nearly one in five families (17%) confirmed they are still spending all of their monthly income on household bills, and a further 42% use about three quarters of their income to cover every day living costs, demonstrating why families continue to feel the pinch. This has marginally improved since January 2013 where 47% of families were spending three quarters of their income on bills.
Families in the North West are more likely to spend at least three quarters of their monthly income on household bills, as 68% of respondents from this region claim they do so, while 52% of those respondents from London spend the same levels on bills each month – giving Londoners more spare cash each month.
Paying off personal debt
When it comes to debt, over half (55%) of the population said that there has been no change in their ability to pay off debt in the last 12 months, although 28% said that it has become more difficult. Two thirds (67%) said they are always up to date with credit payments, however this is 4% lower than the same time last year.
Saving for a rainy day
Families in Greater London and Scotland are most comfortable with their level of savings, with 55% and 59% respectively saying they have enough to cover any unexpected outgoings or a change in circumstances. Nearly two fifths (39%) of families in Greater London feel they do not have enough savings cover these eventualities, which is substantially lower than the 48% of families from the North West that said they did not have enough. Just over half (51%) of families in the North West stated they had enough in savings.
Families expect improvements as recovery takes hold
Sentiment about an improvement in the wider economy seems to be reflected in the number of families expecting to have more disposable income in the next six months which is at its highest point since October 2012, as one in four (24%) say that they anticipate an improved financial situation.
Simon Kenyon, Lloyds Bank’s director of Everyday Banking said; “Family purse strings have been under strain for some time and improvements in the wider economy have not yet taken the pressure off household finances. However, there are signs of change as the economy recovers. Families are planning to save more and expect higher disposable income over the coming months.”