Cost-of-living crisis brings out Brits’ savvy side

With the amount of disposable income per person in the UK dropping by an average of £280 a year since the pandemic started, you may be forgiven for thinking that households would have been forced to dip into their savings or borrow more to get by.

But, although that will undoubtedly have been the case for some, a new report shows the cost-of-living crisis has actually turned us from a nation of spenders into savvy savers.

Research from the Resolution Foundation reveals households have reduced their consumption by more than their incomes have fallen. In fact, consumption per person has been slashed by £1,200 a year.

During the final quarter of 2023, on average, families saved 6% of their disposable income. This is the highest rate outside of the pandemic in more than three decades.

Where are we making cutbacks?

The report says people have made significant cutbacks in a number of areas during the cost-of-living crisis, compared with the first quarter of 2022:

• energy use fell by 11%
• the amount of food consumed was down 7%
• spending on luxuries plummeted by 18%

A nation of savers

Commenting on the findings, Research Director at the Resolution Foundation James Smith said:

“The crisis has made us poorer, with a sharp rise in the cost of essentials hitting lower-income families hardest.

“It has also turned us from a nation of spenders to a nation of savers.”