UK households experienced an improvement in their living standards at the close of 2024, as per official data that align with upgraded expectations for the future. The Office for National Statistics (ONS) revealed that real households’ disposable income (RHDI) per person surged by 1.7% in the fourth quarter, alongside unrevised data showing a 0.1% growth in the economy during the same period.
The increase in spending power, factoring in inflation effects, surpassed the 0.6% growth seen in the previous three months. The bulk of this rise went into savings rather than immediate spending, attributed to a decrease in consumer confidence and a rise in unemployment during that time.
The boost in disposable income was primarily fueled by public sector pay agreements post-Labour’s election victory and private sector pay increments that outpaced price growth in the economy. Forecasts from the Office for Budget Responsibility (OBR) in their updated spring statement predicted an average annual growth of 0.5% in disposable incomes between 2025 and 2030, translating to a £500 annual boost, according to Chancellor Rachel Reeves.
The unexpected 1% rise in retail sales volumes in February can partially be explained by the positive trend in disposable incomes. Despite a contraction of 0.1% in January, recent data suggests an overall increase in economic growth over the past two months, with manufacturing and construction sectors showing signs of recovery. However, private sector activity remains subdued amid persisting consumer and business confidence challenges.
The OBR’s report also downgraded the UK’s growth projections for the year from 2% to 1%, citing external factors like Trump trade war impacts on the market. This downgrade necessitated spending cuts to maintain fiscal rules, eroding the headroom set aside for such purposes.
As the effects of the fiscal event unfold, businesses anticipate rising costs from higher taxes and minimum pay requirements from April, potentially impacting investments, pay scales, and prices. Additionally, households are likely to face increased financial pressure as essential bills, including water, council tax, and energy, are expected to rise above the inflation rate.
Looking ahead, the prospects for Bank of England rate cuts are under threat due to the lingering effects of the Trump trade war and high wage growth. Liberal Democrat Treasury spokesperson Daisy Cooper criticized the minor revisions in the ONS growth data, highlighting the challenges faced by families, pensioners, and small business owners amidst sluggish growth, higher taxes, and reduced support.
In conclusion, the chancellor’s spring statement missed the mark in addressing the necessary changes demanded after years of Conservative mismanagement, according to critics. The need for sustainable economic policies to support households and businesses remains a pressing issue in the current economic landscape.
For more updates from Sky News, visit the following links:
– Port giant ‘discredited’ by minister despite £1bn investment
– Trump tariffs: German town frets over VW future
– Boohoo’s Debenhams renaming opposed by Ashley
SOURCE