Signs of a boost in household spending power

25/01/2018

The first pay awards of 2018 have been worth an average of 2.5% – a 0.5% increase on the 2017 average and a welcome sign that the spending power of UK households may be about to increase, according to a snapshot survey of awards that became effective in January by pay analysis and HR specialist, XpertHR.

The survey sample covered 59 firms in manufacturing and production and private sector services. It follows data released earlier in January by the Office of National Statistics * that showed wage growth rose to a near one year high in the 3 months to November 2017. The number of people in employment also increased, confounding gloomy predictions of a fall.

Low wage growth, coupled with an increase of around 3% in inflation caused in part by the

fall in the pound after the 2016 Brexit referendum, has reduced the spending power of many households and exerted a negative effect on economic growth in Britain.

XpertHR points out that The Bank of England is watching for signs that Britain’s subdued wage growth is gathering momentum as it considers when to follow up on last November’s first interest rate increase for more than a decade.

CPA’s members will be encouraged to see consumers have more disposable income. However, concerns continue at the very high levels of personal debt out there. Increases in disposable income will likely feed into increased spending and therefore retailers and other consumer facing businesses are likely to want to increase orders. Make sure you have effective credit policies and are regularly credit checking these customers. You want to get the right balance between increased sales and being over exposed to credit risk.

The benchmark credit management and debt recovery services that have been developed and refined by CPA over more than a century will become ever more relevant as business picks up and cash flows come under increasing pressure.

* ‘Employment surges as Britain’s economy survives fall in the pound’, CPA News, 24 January 2018.