Households are being left with £2,016 less a year, as the cost of living tightens its grip, with families hit by higher water bills, childcare costs and broadband charges, according to a major new study. Figures from Moneysupermarket show that disposable income has fallen by nearly a third in just three months.
The average Brit was left with just £513.75 between April and June, down from £682.27 in the previous quarter. That’s despite energy and mortgage costs easing slightly. Spending on everyday living hit £52.14 a day, or £1,564.25 a month, according to the price comparison site’s Household Money Index, which tracks spending across 31 categories including utilities, insurance, mortgages and groceries.
Lis Barton, chief customer officer of Mony Group, which owns Moneysupermarket, said: “Energy bills have eased off for many this summer, helped along by a lower price cap, milder weather and more fixed-rate deals on the table, offering a bit of breathing space in a still-volatile market. However, there are some bills that are more difficult to cut, like water and childcare costs.”
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The report found that while energy bills and mortgage repayments fell by 9% and 11% respectively, these savings were more than wiped out by rising prices elsewhere. Water bills soared by 11%, broadband charges jumped 8% to £42.70, childcare and school costs were up 10%, health insurance rocketed by 22% and gym memberships surged 21%.
As a result, essential spending now swallows up 75% of the average monthly income – up from 69% in the previous quarter – leaving little room for anything else.
To make matters worse, new figures from the Office for National Statistics last week revealed that inflation rose to 3.6% in June – the highest in 18 months. Food prices remain stubbornly high, with butter and beef both up more than 20% over the past year.
Despite this, some households are still splashing out on non-essentials. Spending on TV streaming rose by 25%, gym memberships by 21% and gaming by 28%. Ms Barton said: “We would definitely expect to see people prioritising essential spending over discretionary purchases over the coming months and continuing to find savings where they can.”
Separately, research from Deloitte shows consumer confidence took a sharp knock in the second quarter, falling by 2.6 percentage points to -10.4% – the biggest decline since October 2022, when inflation peaked at a 41-year high.
The survey of 3,200 UK consumers found confidence had dropped across all six categories it tracks, with sentiment about job security down by 4.8 points. Optimism around job opportunities and career progression fell by 3.9 points amid signs the labour market is weakening.
Céline Fenech, consumer insight lead at Deloitte, warned: “After recovering from its lowest level on record in the third quarter of 2022, when inflation peaked to a historic high, our consumer confidence index has declined for the first time in almost three years.
“This drop in confidence signals a weakening of consumers’ resilience, as concerns of a slowing labour market have left consumers worried about job security and income growth prospects, while persistent inflation and a high cost of living have negatively impacted sentiment towards personal debt,” she said.
“However, we have seen how the mood of the consumer can change and adapt to new circumstances. If an uptick in both economic growth and business sentiment reduces pressures on the job market and on earnings, a return to positive confidence could still be on the cards.”