Topline: Household spending in the U.K. is at an all-time high, and wealth and income per head have increased—yet an increasing number of people expect the economy to worsen in the year ahead as Brexit looms.
Measures of economic well-being, such as disposable income, spending and net financial wealth, rose between January and March, new figures from the Office for National Statistics (ONS) show. Net financial wealth per head grew the most at 3% compared with the same period last year. This was driven by an increase in the value of equity and investment fund shares and pension plans.
Overall, happiness was slightly up, from 7.52 to 7.56 on a scale of 10, but there was little change in other measures of personal well-being such as life satisfaction, anxiety and feeling that things in life are worthwhile. Some 4.4 million people still report low levels of happiness.
People are more worried about unemployment than they have been in the past five and a half years, despite a strong labor market and unemployment at a record low of 3.9%—the lowest level since 1974.
Optimism about the economy’s future is also waning. While consumers are feeling positive about their personal finances, they expect the general economy to dip over the next 12 months. Expectations about the general economy are now at their lowest point since 2011.
Despite this, household spending per head grew for the ninth-consecutive quarter. Some 43% of this was driven by a rise in spending on life insurance. In contrast, consumers spent 1.7% less on restaurants and cafes than in the previous quarter.
According to the ONS, higher spending on life insurance and lower spending on leisure activities, like visiting cafes and restaurants, is associated with lower life satisfaction, and this could be reflected in future well-being surveys.
Surprising fact: Despite the positive figures from this quarter, U.K. average wages, which account for the impact of inflation, still have still not recovered to pre-financial-crisis levels, leaving low- and middle-income households most vulnerable in the event of a recession, according to the Resolution Foundation.
Key background: The prospect of a no-deal Brexit is likely to have soured any positive feelings about the economy, analysts say. “With a no-deal Brexit looming, the U.K. economy is arguably at its most critical juncture for a decade, and it’s no surprise people feel less secure about their jobs and the economic future,” said Amanda Mackenzie, chief executive of Business in the Community.
The U.K. economy shrank 0.2% between April and June, for the first time since 2012, ONS figures revealed last week. Concerns about Britain leaving the EU without a deal have ramped up warnings of a recession, with the Bank of England warning of a one in three chance of the U.K. falling in a recession by 2020 regardless of the outcome of Brexit negotiations.
Meanwhile, high street retailers continue to report a lower number of visitors, with foot traffic continuing to decline with a 2.7% drop in the second quarter. Around 10% of retail space was empty last month, the highest rate since 2015, figures from the British Retail Consortium show.