New research highlights a worrying decline in purchasing power across the UK, with £100,000 left in a bank account in 2004 now worth the equivalent of just £59,021 in today’s economy. This represents a staggering 41% loss in purchasing power over the past 20 years, according to a study conducted by Tickmill, an international online trading broker.
The study compares economic trends in the UK and the European Union, revealing contrasting trajectories. While the UK’s purchasing power has declined by 0.4%, now standing at £41,573, the EU has seen a modest rise of 0.1%, reaching £40,874.
Key Drivers of Declining Purchasing Power
The steep decline in purchasing power is closely tied to the rising cost of living. If the UK were still part of the European Union, it would rank as the fifth most expensive country, following Ireland, Luxembourg, Denmark, and the Netherlands.
Economic difficulties are widespread, with 3 in 10 Britons struggling to make ends meet. Certain groups are disproportionately affected, including:
- Women: 30% report difficulties, compared to 25% of men.
- Ages 35-49: 39% are impacted, the highest among age groups.
- Low-Income Households: 60% of households earning less than £15,000 annually face financial strain.
- Single Parents: 50% struggle with the rising cost of living.
Regional Disparities
Northern Ireland is the hardest-hit region, with 34% of residents struggling financially, followed by:
- Wales: 31%
- England: 28%
- Scotland: 22%
Within England, the North East has the highest proportion of residents facing economic challenges, with 40% affected. Even in wealthier areas like London, 1 in 4 adults report financial strain due to the city’s high living costs.
How Britons Are Coping
In response to rising costs, Britons are making significant lifestyle adjustments:
- Cutting Back on Non-Essentials: 53% are reducing or delaying spending on dining out, entertainment, and other discretionary items.
- Reducing Energy Usage: 52% have scaled back household energy consumption.
- Spending Less on Groceries: 48% have reduced their grocery bills.
- Postponing Major Purchases: 41% are deferring holidays, buying cars, or planning weddings.
- Working More: 26% are taking on overtime or additional jobs to boost income.
Impact on Savings and Investments
Financial challenges have also led to changes in saving and investment habits:
- 1 in 4 adults have dipped into their savings or investments to cover daily expenses.
- 44% have reduced or stopped saving altogether, up by 4% compared to 2023.
Despite holding £430 billion in cash deposits, 13 million UK residents are not investing their money, citing:
- Lack of knowledge (74%)
- Fear of financial loss (43%)
This reluctance to invest exacerbates the decline in purchasing power, as savings in cash fail to keep pace with inflation over time.
The data in full is on the below infographic.
