Cutting back on Christmas

November 09, 2011, 3:45 PM GMT+0

With Christmas - and all its attendant costs - just around the corner, results from the latest Household Economic Activity tracker show majority of British households expect their finances to worsen in coming months

With experts increasingly predicting tougher economic times ahead, now seems a good time to look at the public’s economic confidence from YouGov’s HEAT report. The October results show confidence about household finances remaining very low with 46% expecting theirs to be worse in 12 months versus 15% expecting an improvement.

This pessimism is largely driven by cash positions – 28% of UK households had just £125 or less available in discretionary income after paying utilities, housing, and tax last month. This is up from 21% last year.

This cash crunch is affecting all Britons as incomes fail to keep pace with inflation. Among those households making less than £30,000, 42% have less cash available this month than last with only 7% seeing more available. Among top earning households with over £50,000 in income, 25% report less cash available versus 13% with an increase.

All income groups expect the crunch to continue. Of households with £50k+ in income, 44% expect cash available to decline in the coming 12 months, versus only 16% expecting an increase. Among less well-off households (less than £30k income), the crunch is more severe, with 49% expecting a decrease while 13% expect an increase.

This reduction in disposable income is likely to manifest itself under the Christmas tree. Two fifths of households are planning to decrease their spending on gifts this year, with only 7% increasing. The cuts are consistent across all incomes and demographics and are also seen in the US, where 42% expect spending to decrease this holiday compared to 10 per cent increasing. After a difficult year for retailers, it does not look likely that Christmas will bring much cheer.

This article also appears in City AM