Yorkshire Building Society has warned that the average UK household will be short of a £100 a month by 2024, as the cost of living crisis means expenses will outpace incomes.
The figures come from the mutual’s Inflation Nation report and reveal that weekly household spending is set to rise to £705 in just two years’ time.
However, the report, which was conducted in partnership with the Centre for Economics and Business Research (Cebr), shows that real weekly incomes will rise to just £680, leaving households short of £25 a week, or roughly £100 a month.
Yorkshire Building Society’s study seeks to understand how prepared UK adults are to cope with the cost of living crisis. It reveals that despite incomes remaining slightly higher than expenses in 2021 (£596 versus £595, respectively), the rising cost of living has already forced nearly four in ten savers (39%) to dip into their savings in the last 12 months.
23% of those savers said they had dipped into their savings by between £200 and £499, while 12% said they had done so by between £500 and £999. 17% said they had dipped into their savings by over £1,000.
This latest report comes as the Resolution Foundation predicts that the ongoing crisis will push 1.3 million less financially resilient people into poverty. Indeed, 15% of those surveyed said they had under £500 in savings – while 17% said they had no savings at all.
Overall, 41% of those surveyed said they expected their household outgoings to increase by between £101 and £500 each month over the next 12 months – with the areas causing most concern being utility prices (70%), food and drink prices (60%), and fuel prices (58%).
The research showed that by 2024, housing and utilities costs are expected to reach £100.83 a week, up from £84.59 in 2021. Meanwhile average low weekly transport costs due to some workers shifting to home-working throughout the pandemic are now set to rise by more than £40 a week or £170 pounds a month.
67% of those surveyed said they are worried about the impact the crisis will have on them and 46% say the crisis is already having a negative impact on their mental wellbeing.
Stephen White, interim chief executive of Yorkshire Building Society, said: “We may be emerging from the global pandemic, but our figures indicate we are moving from one crisis to another.
“Inflation is already high and this, coupled with increasing energy price caps and fuel charges, means there could be challenging times ahead for many households.
“Families across the UK are already having to budget carefully in order to make ends meet. Some have accrued savings over the course of the pandemic, which can help foot monthly bills. Others simply do not have the financial resilience to withstand rising costs.
“Whatever people’s current financial situation, it is important they take action now in order to limit the damage the cost of living crisis could cause. Researching ways to cut costs and make the most of services available is paramount – even for those who may feel relatively resilient.”
Nitesh Patel, strategic economist at Yorkshire Building Society, added: “Costs are rising at a considerably higher rate than income, and will soon overtake income altogether. This level of inflation will see savings quickly depleted for those who have them if action is not taken.
“The concern is not only the here and now – but the knock-on effect of depleted savings for the future. Those planning to buy a home, for example, may have to wait considerably longer whilst they build up their savings again.
“Those who are less financially resilient are encouraged to seek help from organisations such as Citizens Advice so that they can navigate the coming months – and potentially years – without getting into debt, or, indeed, getting into further debt.
“Financial institutions, such as our own, have a responsibility to educate people as much as possible about the real impact this crisis can have and offer any guidance we can. We work with Citizens Advice and Age UK, as well as running our own financial education programme, with a view to helping those in need of support.”
