What Are Brits Doing With Their Disposable Income?

Disposable income has become something of a luxury in the UK at present, as rising costs across the board have rendered household budgets no longer fully fit for purpose.

The cost-of-living crisis has rendered ever clearer the importance of financial literacy, and care around disposable income – but what are Brits tending to do with it? 

Disposable Income and the Cost of Living 

First, it is important to recognise the direct impacts that the cost-of-living crisis has had on income. While there are significant changes and patterns to discuss with regard to spending priorities, it is also true that the crisis itself – alongside other factors – has fundamentally changed the financial situation of millions of Brits in the UK. 

More specifically, UK citizens generally have less disposable income than they did before the coronavirus pandemic. The rising cost of household energy was chiefly to blame in the winters of 2021-22 and 22-23, but since then costs in other areas have continued to rise. This has been most keenly felt at the supermarket checkout, with some staples having nearly doubled in value over the course of the year.  

As such, unavoidable costs like weekly food shops have gone up, while income sources generally have not. The news cycles of 2023 have been dominated by strike action, as workers across sectors have sought – at the very least – pay parity with wages from before the 2009 banking crisis. Wages have stagnated while costs have risen. 

Saving Habits 

The diminishing levels of disposable income in households across the country are, naturally, having knock-on effects on other aspects of personal finance. One particular area of concern is savings; with less money available after essential costs like utilities and food, there is less money available to put away for the future. 

Not only are people saving less money as a result of their situation, but also acting more shrewdly with regard to their savings mechanisms. Tax-free savings routes like the ISA are becoming common choices, offering savings on interest rates above a certain threshold. The Bank of England’s interest rate hikes has also made savings accounts more competitive with regard to returns, inspiring people to hunt out the best easy-access deals on the market. 

Where Do We Spend? 

Difficult as it has gotten to spend in recent months, spending is still happening – albeit in a more considered manner. The UK narrowly avoided recession conditions at the start of 2023, such conditions being largely influenced by consumer spending habits. This indicates a stagnant, but not regressive, economic situation. 

So where is that money being spent? There are some indications that once-a-year spending habits have not changed, with Brits still stumping up for holidays in spite of limited funds. The hospitality industry is facing difficulties, though, as spending on recreational outings and alcohol seem set to slump. 

The cost-of-living crisis is not an easy thing to navigate, but UK citizens are forging a way through with shrewd and targeted shifts in their approach to spending. The question remains: will the economy recover, and will prices slump?