A recent study conducted by Tickmill, an international online trading broker, paints a stark picture of the economic challenges facing Britons. Over the last two decades, the UK’s purchasing power has plummeted by a significant 41%, with 3 in 10 Britons now struggling to cope with rising costs and economic difficulties.
Diminishing Value of Money
Tickmill’s survey highlights the erosion of money’s value over time. For example, £100,000 left untouched in a bank account since 2004 would now hold the equivalent purchasing power of just £59,021. This underscores how inflation and rising living costs have drastically reduced the real value of savings that are not invested.
In a comparison with the European Union, the study found that purchasing power in the UK has declined by 0.4%, while the EU has experienced a marginal improvement of 0.1%. Currently, the UK’s purchasing power stands at £41,573, slightly ahead of the EU average of £40,874. However, the cost of living in the UK remains among the highest in Europe. If still part of the EU, the UK would rank as the fifth most expensive country, trailing Ireland, Luxembourg, Denmark, and the Netherlands.
Groups Hit the Hardest
The cost-of-living crisis has affected certain groups disproportionately. According to the survey:
- Women: Nearly 3 in 10 women report financial difficulties, compared to 25% of men.
- Age Groups: People aged 35-49 are particularly vulnerable, with 40% struggling to make ends meet.
- Low-Income Households: 6 in 10 households earning under £15,000 per year face significant hardship.
- Single Parents: Half of single-parent households report economic struggles.
Geographically, Northern Ireland leads with 34% of its population affected, followed by Wales (31%), England (28%), and Scotland (22%). Within England, the North East faces the most acute challenges, with 4 in 10 residents struggling. Even in affluent regions like London, 1 in 4 adults is grappling with high living costs.
Lifestyle Adjustments in Response
To navigate these challenges, Britons are making substantial lifestyle changes:
- Cutting Non-Essentials: Over half (53%) are spending less on leisure activities, entertainment, and non-essential purchases.
- Energy Efficiency: 52% have reduced household energy consumption to save costs.
- Grocery Budgets: Nearly half (48%) have cut back on food expenses.
- Postponing Major Purchases: 41% are delaying holidays, car purchases, and other big-ticket items.
- Taking on Extra Work: Over a quarter (26%) are working additional hours or taking second jobs to boost income.
Financial Implications
One of the most concerning findings is the impact on savings and investments. Around 25% of adults have been forced to dip into their savings to cover daily expenses. Meanwhile, 44% have stopped saving entirely or significantly reduced their contributions. This marks a worrying 4% increase compared to 2023.
The reluctance to invest is another factor worsening the decline in purchasing power. An estimated 13 million UK residents collectively hold £430 billion in cash deposits but refrain from investing. Lack of knowledge, difficulty comparing investment products (74%), and fear of losing money (43%) are the main reasons.
Empowering Financial Stability
Tickmill’s study underscores the importance of financial literacy and informed decision-making. By addressing the fear and confusion surrounding investments, Britons could better preserve and grow their purchasing power, ensuring long-term economic resilience.