High earners determined to spend spend spend in 2011
Annual household spending by those earning over £100,000 is expected to increase 7.8% in 2011 as high earners plan to spend their way out of the recession reveals new research from HSBC. This is twice expected inflation for this year.
HSBC surveyed 1,000 UK consumers with household income of over £100,000 to ascertain their expenditure in 2010 and their expectations for 2011. This research shows that the overall spending will increase from £81,060 in 2010 to £87,380 in 2011.
Overall, the area set to face the largest proportional increase in spend this year is transport and travel, which is expected to rise by almost £4,700 in 2011 (64.8%). This is followed by home improvements (35.3%), clothing (28.3%) and household maintenance (25.9%). Debt repayment is also expected to increase 13.3%.
The largest cutbacks in expenditure will be on one-off purchases (-34.6%), such as cars, gifts and weddings, health and wellbeing (-23%) such as spa days and beauty treatments and recreation and leisure (-21.3%) such as days out and purchasing new technologies.
Transport and travel tops spending
Spend on transport and travel will rise significantly among high earners in 2011, mostly spurred on by essential costs such as an expected 58% increase in the cost of commuting and the rising cost of diesel and petrol fuelling the cost of running a car by 41%. The largest proportional increase is on non-essential travel with an expected 125% increase in expenditure on flights in 2011.
Home is where the heart is
The biggest non-essential areas for increased costs are for home improvement - with expenditure on general home improvements alone expected to increase by over £4,000 (319%) in 2011. Extending their current property is also a key area of expenditure for high earners in 2011 as both loft (45%) and basement conversions (up 41%) seeing large increases in the next year as many high earners seek to improve instead of move.
Pampering, parties and pets feel the pinch
The most significant proportional cutbacks for the affluent are on luxury and one-off high expenditure items such as spa and beauty treatments (-67%), weddings (-64%), birthday parties (-58%), jewellery (-48%) and wedding gifts (-46%). Other large cutbacks will include children's tutors (-40%), vehicle purchase (-36%) and holiday home purchase (-33%). The highest percentage cutback in spending in 2011 will be on horse and pet purchase (-73%),
Low six figure households to spend three times more than higher income households
Households with an income of between £100-150,000 are expecting to increase their total expenditure significantly more than households with an income of over £150,000 in 2011. £100-150,000 households will increase expenditure in 2011 by almost three times as much as £150,000+ households (£12,940 compared to £4,845). Proportionally this is a 19.1% annual increase in expenditure from households with an income of £100-150,000 compared to 4.3% from £150.000+ households. This additional Increase in spending is mainly fuelled by home improvements and transport and travel.
The most significant cut backs will be on one-off items such as gifts, birthday and anniversary parties and weddings for both income groups with £100-150,000 households expecting to spend 25% less and £150,000+ households planning to spend 45% less..
Richard Brown, Head of Savings and Investments at HSBC comments: "Many affluent consumers will be prioritising their homes for non-essential expenditure this year, as the cost of living and essential expenses continue to rise apace. While some areas will naturally face cutbacks, specifically luxuries such as parties and pampering, overall spending from this income group will be up.
"Despite additional pressures on income as a result of the increase tax regimes for those earning over £100,000, the planned eight per cent rise in expenditure in 2011 suggests high earners are set to spend their way out of the recession."