UK turns to saving money in cost of living crisis
THE cost of living shock has turned the UK from a nation of spenders into savers, according to a think tank.
The “tumultuous period of price change” has changed what households do with their money, with consumption being cut by more than the fall in incomes, the Resolution Foundation said.
Official data released next week looks set to show inflation returning to close to the 2% target, drawing a line under a three-year inflation spike that has left households spending less and saving more, the Foundation said.
With Consumer Prices Index (CPI) inflation for April expected to fall within touching distance of the Bank of England’s 2% target, the Foundation looked at how the inflation squeeze has affected living standards, spending behaviour and finances.
CPI inflation peaked at 11.1% in October 2022, and since March 2021 overall prices have increased by 22%, researchers said.
CPI inflation rose by 3.2% in the 12 months to March 2024, down from 3.4% in February, according to Office for National Statistics (ONS) data.
The UK squeezed more than a decade’s worth of “normal” inflation into just three years, according to the Foundation, which is focused on improving the living standards for those on low to middle incomes.
The cost of essentials has risen particularly quickly, putting poorer households at the heart of the crisis, as a bigger proportion of their spending goes on essentials, researchers added.
The Foundation said that households generally have cut down sharply on the amount they consume during the cost of living crisis.