Money must work harder as disposable income falls

British households have seen their disposable income fall by a third in the past three months, figures from Moneysupermarket show.

The comparison site’s latest household money index showed that the average person had £513.75 left each month between April and June after covering bills and outgoings, down from £682.27 the previous quarter.

The average Brit spent £52.14 a day to get by, the equivalent of £1,564.25 a month. The index tracks consumer spending across 31 categories, including utilities, mortgages, insurance, subscriptions and groceries.

Lis Barton, chief customer officer of Mony Group, parent company of the comparison site, said there had been “movements up and down” across different categories. She said:

“Energy bills have eased off for many this summer, helped along by a lower price cap, milder weather and more fixed-rate deals on the table, offering a bit of breathing space in a still volatile market.

However, there are some bills that are more difficult to cut, like water and childcare costs.”

Essential spending caused a significant squeeze on personal finances, rising to 75% of monthly income compared with 69% from January to March.

Official figures from the Office for National Statistics showed the rate of inflation rose to 3.6% in June. Food costs remained a key driver, with butter and beef prices increasing by more than 20% year-on-year.

Despite this squeeze, many households continued spending on non-essentials, with TV streaming up by 25%, gym memberships up 21% and gaming up 28%.

New data from Deloitte shows that consumer confidence dropped by 2.6 percentage points in the second quarter to -10.4%, the first significant fall since October 2022 when inflation hit a 41-year high of 11.1%.