By Sammie Jones-
UK households have been most affected by the sharpest fall in the amount of cash they have available to spend for almost eight years, due to a worsening cost of living crisis driven by high inflation and rising energy bills.
Rising inflation impacted by Covid and its associated restrictions have driven in prices up across the board, leaving brits worse off in terms of cash, according to a report by the insurer Scottish Widows.
Increasing living costs at the end of last year hit people’s pockets and led to the steepest decline in cash availability since the start of 2014. Prices have risen in bars, markets, household bills, without a proportionate rise in overall income, setting many households back.
The index, which measures households’ overall perceptions of financial wellbeing, fell from 44.0 in the third quarter of 2021 to 40.1 in the final quarter of last year amid worries about surging bills and the impacts of the Omicron variant of Covid-19
Pessimistic about future finances in 2022 is high , according to the latest reading from its quarterly household finance index.
The poll of 1,500 individuals, compiled by Ipsos Mori and IHS Markit on behalf of the insurer, found that pressure intensified on savings and disposable income in the final months of 2021, with both declining quicker than at anytime in over the past seven years.
The index, which measures households’ overall perceptions of financial wellbeing, fell from 44 in the third quarter to 40.1 in the final quarter of 2021, the lowest reading since the second quarter of 2020 when Covid-19 first spread. A figure above 50 signals an improvement as opposed to a deterioration.
It comes as a separate report from the Royal Society for Arts said young adults were among the hardest hit by the cost of living crisis, in a warning that the damage to their finances from inflation, student debt, and rising taxes risked creating a new “generation precariat”.
According to a survey of 1,000 young adults by the thinktank, researchers found almost half (47%) were unable or just about managing to make ends meet each month, or had an income that varied significantly from paycheck to paycheck.
With inflation at the highest level in a decade, ministers are coming under growing pressure to act on living standards ahead of an expected sharp increase in gas and electricity prices for British consumers from April.
The RSA study, carried out as part of an inquiry by the Health Foundation thinktank into young people’s health concluded that those who are financially hard up were far more likely to be worried about their mental and physical health.
It concluded that just 41% of young people believed others like them would ever be able to buy their own home, and only 51% thought they would ever earn enough to support a family. Just over half (51%) said they thought young people like them would not be able to retire and live comfortably when they are older.
The news will put pressure on bosses to raise their wages to make up for soaring prices across the economy, but also calls for employees to step up their output and work a bit harder to keep bosses happy.