‘Light at end of tunnel’ for UK consumers - Economy - News | moneyfacts.co.uk


Moneyfacts.co.uk News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

‘Light at end of tunnel’ for UK consumers

‘Light at end of tunnel’ for UK consumers

Category: Economy

Updated: 28/05/2012
First Published: 28/05/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Changes to the tax system and falling inflation will bolster the wallets of the average earner by almost £500 this year, according to a new report.

After a 'torrid' five years, the Ernst & Young ITEM Club said there is now 'light at the end of the tunnel for the hard pressed consumer', who it calculates will benefit by £482 this year and £624 in 2013.

Suggesting consumers will feel better off by the end of the year, the report said that, provided oil prices continue to ease, inflation is likely to move back towards the 2% target by the end of the year, bringing prices into line with wages.

This, combined with an increase in the personal tax allowance, will see real take home pay stabilising this year and accelerating into 2013, which will benefit the vast majority of consumers.

In turn, this is predicted to feed through to a 'steady pick-up' in spending that should provide a much needed boost to the UK 's high streets.

Retailers have been warned, however, that any recovery will be 'slow and steady', as consumers concentrate on paying down debt rather than spending.

Indeed, it is forecast that spending levels won't return to pre-recession levels until 2015.

"After the tightest squeeze on consumer incomes in a generation, the worst is now behind us and most people should start to feel a bit better off by the end of the year," said Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club.

"Wage growth will finally begin to outpace inflation and our pay packets will also be boosted by the tax changes announced in the Budget.

"Only the top 10% of the income distribution, earning above £36,000, and the bottom 10%, who aren't liable for income tax, won't benefit from the increase in the personal allowance."

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Inflation and you: what does the latest rise mean?

Today saw not only the outlining of the Government’s stance on leaving the EU, but also a rise in inflation that was larger than predicted. But what does this mean for the pound in your pocket?

Base rate remains unchanged in surprise decision

Earlier today, the Bank of England’s rate setting committee announced that it had voted decisively to keep base rate on hold at its record low of 0.5%. But what does it mean for you?

Budget 2016 – an overview

Well, George Osborne has just revealed the Budget for 2016 – his eighth so far as Chancellor – and as ever, there were some winners and losers from the whole thing. Below is a quick overview of the key points.