UK
London, England, UK

The purchasing power in the UK has dropped by 41% over the last 20 years. Today, £100,000 left in a bank account since 2004 without investment would now be worth £59,021.

This figure is one of the findings from a study conducted by Tickmill, an international online trading broker.

The study compared the economic situation in the UK and the European Union through the infographic 'Purchasing Power and Cost of Living: UK vs EU.'

The analysis reveals a slight decline of 0.4% in the UK's purchasing power, currently at £41,573. In contrast, the European Union has seen a modest rise of 0.1%, reaching £40,874.

The Reason for Decline

Why is purchasing power declining in the UK? One key factor is the cost of living. If the UK were still part of the European Union, it would rank as the fifth most expensive country, behind Ireland, Luxembourg, Denmark, and the Netherlands.

Unsurprisingly, 3 in 10 Britons are struggling with the cost of living. Women (3 in 10, compared to 25% of men), those aged between 35 and 49 (4 in 10), households earning less than £15,000 (6 in 10), and single parents (1 in 2) are among the most affected groups.

Among UK nations, Northern Ireland is the most brutal hit, with 34% of its population facing financial difficulties, followed by Wales (31%), England (28%), and Scotland (22%). The North East has the highest percentage of people struggling in England, with 4 in 10 residents affected. Even in London, the high costs impact 1 in 4 adults.

Significant Data to Consider

In response to these challenges, Britons are making significant adjustments:

  • 53% have cut back or delayed spending on smaller items like eating out, entertainment, subscriptions, clothing, toys, books, etc.;
  • 52% have reduced household energy consumption;
  • 48% have decreased their grocery spending;
  • 41% have scaled back or postponed significant expenditures, such as holidays, cars, and weddings;
  • 26% are working longer hours, taking on overtime, or pursuing additional jobs to earn extra income.

The British also made changes on the financial side. One in four adults has been forced to dip into their savings or investments to cover daily expenses. Moreover, 44% have stopped saving or investing entirely or have reduced their savings and investments—a 4% increase compared to 2023.

Another critical factor contributing to the decline in purchasing power is the lack of investment. It is estimated that 13 million UK residents hold £430 billion in cash deposits but do not invest. The reasons? Seventy-four per cent say they cannot compare investment products effectively, and 43% fear losing their money.

A lack of knowledge and fear are preventing many savers from taking advantage of an important opportunity to preserve or increase their purchasing power in the long term.

About the author: Lewis Sherring has been writing about economics and finance for over 10 years.

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