The UK economy is, undeniably, going through a difficult period, with limited growth and talk of a possible recession never too far away.
So the Chancellor is likely to be cheered by new figures from the Nationwide Building Society showing that overall non-essential spending has risen in the last year.
Spending on non-essentials stood at £3.15bn in April 2022 – up eight per cent on the same month of the previous year.
The number of transactions on non-essentials also went up by nine per cent to 106.3m year-on-year.
So let’s drill down a bit deeper into what people are spending their money on.
Travel and holidays
Perhaps the most significant finding of the study was that spending on airline travel went up by 34 per cent last year, while the number of transactions made to airlines went up by 36 per cent.
That’s perhaps a reflection, in part, of how the market was starting from a fairly low base.
Many people would have been reluctant to go on holiday in summer 2021 amid ever-changing Covid restrictions and travel requirements, and business travel activity was also still limited.
But summer 2022 felt, dare we say it, normal, and the pent up demand for both domestic and international travel became apparent among both business and leisure travellers.
While high inflation and economic woes is definitely putting lots of households under financial pressure, it appears as if going on holiday is non-negotiable for many.
In fact, some would argue whether it’s right to class this as non-essential spending, given the massive physical and mental benefits that going on a break can have.
Another interesting finding was that spending on digital goods has risen by 33 per cent year-on-year, while the number of transactions went up by 27 per cent.
Again, many will question whether this is non-essential spending, as millions of us rely on devices such as smartphones and laptops for work, staying in touch with the family and accessing vital services.
So just as with holidays and travel, digital goods is an area where people apparently don’t want to compromise, and are happy to invest in new and improved devices, despite wider financial constraints.
Eating and drinking out
The amount spent on eating and drinking out has gone up by 13 per cent in the last year, and the number of transactions rose by ten per cent.
As with holidays and travel, this possibly reflects an increase in confidence among the wider public regarding Covid-19, now that pandemic restrictions – thankfully – are going further into the rear view mirror.
For many people, non-essential spending is the difference between living and simply surviving.
It’s things like holidays, socialising with friends and getting tickets for a show or concert that make life worth living.
But with so many people remaining concerned about their finances as inflation remains stubbornly high, it’s more and more important to manage your money effectively so you can make ends meet and still do the things you love.
If you need any advice on how to make your money work hard for you and get the best possible returns on your investments, please don’t hesitate to get in touch with us.
We’ll be happy to speak with you and answer any questions you may have!