Brexit fears strike households
Half (51.9%) of working-age households are worried about how leaving the EU will affect their financial wellbeing, according to the latest Disposable Income Index from Scottish Friendly.
The quarterly report, which has been compiled in conjunction with leading think-tank the Social Market Foundation, reveals that disposable income remained relatively flat with a small 2.4% improvement overall (from £1000 to £1,024) across the country over the last quarter,1 bolstered by low inflation and the continued positive impact of the National Living Wage.
However, with growth expected to slow in the wake of the EU referendum result and the dramatic fall in the value of sterling, many still cite concerns about their financial well-being, despite unemployment levels remaining relatively low.
A large minority of the nation are more apprehensive about what impact the vote to leave will have on the pound in their pocket. In particular, working-age households (aged 25-54) are most concerned about how leaving the EU would affect their families financially, and have become more concerned since the vote with 51.9% voicing concerns compared to 48.1% in the last quarter. Worryingly the proportion of UK households spending more than their monthly income on housing costs has risen from 5.8% to 7.1%.
Interestingly, people are still feeling secure in their jobs. Just over a quarter of people (26.9%) are concerned that leaving the EU might affect their job. However, the younger generation were more worried about the impact with more than half of 18-24 year olds (54.2%) and 49.5% of 25-34 year olds saying they are concerned their jobs are at risk.
The most immediate concern in the weeks directly following the referendum was that prices would rise and things would become more expensive – the proportion of households reporting concern about this rose from 40.3% before the referendum to 47.9% in the weeks afterwards. On the other hand a third of people are not worried about the impact of Brexit at all (32.1%).
Despite the moderate increase of 2.4% in monthly disposable income compared to last quarter, only 18.8% of households feel they have more cash left over at the end of the month than they did 12 months ago and nearly half (47.0%) of households are worried about how they would deal with a big, unexpected bill, such as the car or washing machine breaking down.
Encouragingly just over half of all households (51.5%) regularly save or invest each month –the second quarter in a row showing a slight improvement. 11.6% of households are planning to save more as a result of the EU referendum, compared to 5.6% who plan to save less.
Calum Bennie, savings expert at Scottish Friendly, said: “Clearly the economic consequences of the Brexit vote are at the forefront of people’s minds when it comes to planning their finances. Concerns persist as monthly disposable income has remained relatively flat. . There is still a sense of financial fragility in many parts of the UK and amongst young people in particular, who don’t feel as secure in their jobs or as able to save as older generations.
“Despite the recent blow to savers of the cut in base rates it’s encouraging to see that over half of UK households regularly save or invest each month. With economic uncertainty ahead, including inflationary pressures, building a robust buffer is going to be important for many households and more must be done to encourage people to get into the habit of putting money away for their future.”