UK household spending has fallen more than almost every other OECD country since the pandemic, according to new Trades Union Congress (TUC) analysis published on Friday 1 March.
The analysis shows the amount UK households spent in their local economies fell by 1.4% between the end of 2019 and third quarter of 2023 – the equivalent of £20bn annually.
During this period only Germany and the Czech Republic experienced a bigger fall among 37 OECD nations.
UK household spending: an international outlier
The TUC says that had UK household spending kept pace with the OECD average, the UK economy would now be at least £84bn a year bigger.
In the UK households have cut spending by £700 a year, on average, since Covid struck.
But had spending risen in line with the OECD average, UK households would be spending £2,900 a year more than before the pandemic.
Tories’ failure to grow the economy
The TUC blamed the fall in household spending on the government’s failure to deliver growth since the pandemic and on years of economic stagnation.
The UK economy is just 1% bigger than before the pandemic – compared to 8.2% in America and 4.5% in Canada.
And the UK is the only G7 country currently in recession – after two successive negative quarters of growth.
The TUC says this had a huge knock-on impact on living standards.
The UK is only G7 economy where real household disposable income per head hasn’t recovered to its pre-pandemic levels.
The union body estimates that if real disposable income in the UK had risen in line with the G7 average since the end of 2019, UK families would be £750 a year better off.
Years of economic stagnation
The TUC says family budgets have also been shredded by the last 14 years of stagnating living standards.
Real wages in the UK are still worth less than in 2008.
And separate analysis published by the union body at the end of December revealed that unsecured debt (credit cards, loans, hire purchase agreements) is set to rise by £1,400 per household, in real terms, this year.
A ‘serious economic plan needed’
The union body warned that without a “serious” long-term economic plan the UK faces endless “stagnation and decline.”
The TUC urged the chancellor to invest in public services and green infrastructure at the forthcoming Budget to jump-start growth and set living standards on a positive course over the longer-term.
TUC general secretary Paul Nowak said:
People need to be able to spend on their local high streets. But household budgets have been shredded.
Falling living standards have been both a cause and consequence of poor growth.
While families in other countries have seen their disposable incomes rise, many here are struggling to cover even the basics.
This is bad for households and bad for our economy. Lower spending is depressing growth and starving our public services of much-needed revenues.
UK household spending needs a serious plan
On the need for an economic reset, Nowak added:
We can’t carry on like this.
It’s time for a serious long-term economic plan – not sticking-plaster policies.
That means a proper industrial strategy and investment in public services and green infrastructure.
That’s the best way to revive our economy and sustain growth into the future.
Featured image via Gajus-Images – Envato Elements
