UK household spending reached its highest level since the pre-crisis peak last year, despite the squeeze on real incomes that followed sterling’s Brexit-induced depreciation.
Figures released on Thursday by the Office for National Statistics showed average weekly spending — adjusted for inflation — rose from £568.70 to £572.60 in the financial year ending March 2018. This was the highest weekly spend since 2005.
Consumer spending has been supported by a steadily strengthening labour market. Employment was at its highest level yet recorded in the first quarter of 2018, with the proportion of households with no one in work at its lowest level on record.
However, the post-referendum spike in inflation meant that wages were falling in real terms for much of the period concerned, with households running down their savings to sustain spending. Many economists believe households may now choose to rebuild their savings despite the recent pick-up in wage growth, especially given the possibility of a damaging no-deal Brexit.
The ONS data show that the breakdown of spending has remained relatively stable in the last few years. Transport took up the biggest share of budgets, with households spending £80.80, or 14 per cent of total weekly expenditure, on average. There was no big change in the level of spending on housing and household bills, or on food.
The pattern of expenditure reflects the UK’s regional economic disparities, with households in London and the South East spending most at an average £650 a week, and households in the North East around £200 less.