Concerns are raising as new research suggests that households could be left around £100 per month short of what they need to cover their bills.
A report by Yorkshire Building Society and conducted in partnership with the Centre for Economics and Business Research (Cebr) revealed that by 2024, the average weekly spending may exceed incomes. The news comes as costs are set to rise faster than wages.
The report estimates that in two years time, average weekly incomes could increase to £680 while average weekly UK household spending may reach £705 as energy prices and other costs push up the prices of goods and services.
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If the figures are correct, the projected gap adds up to a shortfall of around £100 per month. A survey of 4,000 people was carried out to come up with the "inflation nation" report.
It found that despite incomes remaining slightly higher than expenses in 2021 (at £596 versus £595, respectively), the rising cost of living has already forced nearly four in 10 (39%) people to dip into their savings in the past 12 months. Nearly a quarter (23%) of these savers said they had dipped into their savings by between £200 and £499, while one in eight (12%) had taken out between £500 and £999.
Nearly a fifth (17%) had withdrawn more than £1,000. Just over two-fifths (41%) of people surveyed expect their household outgoings to increase by between £101 and £500 each month over the next 12 months, with utilities, food and drink and fuel prices among the top concerns.
Nitesh Patel, strategic economist at Yorkshire Building Society said: "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."
The research also found people in Northern Ireland, Wales, Scotland, the West Midlands and parts of northern England were particularly likely to report having no savings at all to fall back on, with the UK-wide average standing at 17%.
And here are the percentages of people surveyed with no savings at all in a selection of major UK cities, according to Yorkshire Building Society:
- Belfast, 30%
- Newcastle, 27%
- Cardiff, 24%
- Glasgow, 21%
- Sheffield, 21%
- Birmingham, 19%
- Leeds, 19%
- Manchester, 17%
- Plymouth, 16%
- Southampton, 16%
- Edinburgh, 15%
- Brighton, 14%
- Bristol, 14%
- Liverpool, 14%
- London, 14%
- Nottingham, 13%
- Norwich, 12%
