Brits are living beyond their means like never before...
In 2017, each household spent or invested about 900 pounds ($1,187) more than they received on average - 25 billion pounds in total, according to an ONS article published this week. Britons were previously net borrowers in 1988, the height of a credit-fueled economic boom generated by then Chancellor of the Exchequer Nigel Lawson. But even then the shortfall was just 300 million pounds.
To fund the deficit people have been borrowing more and saving less, encouraged by years of record-low interest rates.
According to ONS figures, the poorest 10% of households spent two and a half times their disposable income, on average, in the financial year ending 2017 – while the richest 10% spent less than half of their available income during the same period.
As The Guardian reports, StepChange, which provides advice for indebted households, said the poorest were in constant need of credit to keep their heads above water.
The charity’s chief executive, Phil Andrew, criticised the ONS for saying that households were living beyond their means, which he said implied they could cut back if they wanted to.
“It’s really unfortunate that this very useful data is so heavily sprinkled with the phrase that households are ‘living beyond their means’. The reality is that too many households, here in Britain, in 2018, simply cannot make ends meet, however hard they try.”
He added: “Not having enough money to make ends meet is not the same thing as living beyond your means – which implies you have a choice, when too many people do not.”
ONS figures Wednesday showed real disposable incomes grew at the slowest pace in five years in the 12 months through March after the Brexit referendum slammed the pound and drove up inflation.
and it could be about to get considerably worse...
“If any more evidence were needed that the Bank of England has left it too late to raise interest rates, this is pretty compelling,” former BOE policy maker Andrew Sentance, who is now a senior economic adviser at PwC, tweeted. “U.K. households are on a massive borrowing spree.”