Brits looking to build a deposit to buy a home have taken a hit with households’ ability to save having been reduced as wage growth trails the rising cost of living.
New figures from the ONS show pay, excluding bonuses, grew by 3.8% in the three months to January 2021 but with inflation taken into account, it fell by -1%.
Kevin Brown, savings specialist at Scottish Friendly, said: “Wages are failing to keep pace with rising inflation which is compounding the cost of living crisis in the UK.
“Overall, unemployment in the UK fell by -0.2% between November and January to 3.9%. On the face of it, this is positive, but although fewer people are classed as out of work the ONS has found the number of people who are economically ‘inactive’ is on the rise, particularly among over 50s.
“Those who have not sought work in the past four weeks or who are unable to start work in the next two weeks has risen to 21.3%. During the pandemic, there was a rise in 16 to 24 year olds who were economically inactive, but this number is falling and those aged 50 to 64 are now driving the increase.
“The most likely reason for this is early retirement but with living costs expected to rise by as much 9% this year it’s going to put a lot of pressure on older people with fixed incomes.
“Households in the UK are not only finding their disposable income is being tightly squeezed it’s also affecting their ability to save. From April onwards, when the new energy price cap comes into effect and planned tax rises are introduced, we expect to see most families’ ability to save reduce.
“For those on lower incomes, households may have to use existing savings to get by or borrow money just to make ends meet. Higher inflation may only be temporary but the effects of the cost of living crisis could be felt by many families for some time.”
