Nearly half of households in the United Kingdom are not experiencing improved living standards despite economic growth, according to a new report by consultancy firm PwC. The analysis highlights a "stark" North-South divide in household spending power, with regions in the north of England, the Midlands, and Wales showing lower spending power than the national average, while London and the South East remain comfortably above.
The report, released on Thursday, identified that the equivalent of 12.5 million households, or 46% of the total, reside in areas where increased business investment and job opportunities have not translated into better quality of life. Households in the North East of England have a spending power 6.6% below the national average, equating to approximately £1,542 less per year. The North West lags by £1,493 annually, and Yorkshire and The Humber are the most affected, with spending power down by £1,917 compared to the national average.
In contrast, households in the South East enjoy spending power 9% above the national average, approximately £2,154 more per year, with London also experiencing significantly higher spending power. Household spending power is measured by income after taxes and housing costs, adjusted for household size and composition, to indicate the funds available for other expenses.
These findings emerge as Prime Minister Andy Burnham has pledged to address the cost of living and regional inequalities to improve living standards. However, questions linger about the economic policies and their impact on public spending, particularly given recent surges in UK government borrowing costs.
The UK has experienced years of sluggish economic growth, although official figures indicate a 1.2% expansion in the economy during the first six months of the current year. Generally, economic growth is desired for its potential to stimulate consumer spending, create jobs, increase tax revenue, and lead to higher wages. In theory, these factors should collectively improve people's financial well-being over time, but the benefits are not always evenly distributed.
PwC's research indicates that only a small fraction of Gross Domestic Product (GDP) growth translates directly into increased household spending power. The report also noted disparities in spending power not only between regions but also within areas considered more affluent, such as London and the South East. For instance, Richmond in London reported the highest average annual disposable income in the capital at £35,448, nearly double the £18,384 recorded in Hammersmith and Fulham.
"The research shows just how differently prosperity is experienced across the UK, with stark variations not only between regions but on each other's doorstep," stated Rachel Taylor, government and health industries leader at PwC. This uneven distribution of economic prosperity suggests that national economic performance does not automatically lead to widespread improvements in individual financial circumstances.