Key facts
- 46% of UK households, or 12.5 million, live in areas where economic growth does not improve living standards.
- A significant North-South divide exists in household spending power, with northern regions and Wales lagging behind London and the South East.
- Households in the North East have £1,542 less spending power annually compared to the national average.
- Households in the South East have £2,154 more spending power annually compared to the national average.
- PwC's report suggests that only a small portion of GDP growth translates into increased household spending power.
- The report advocates for greater local retention of growth revenues and freedom in resource allocation through devolution.
A new report from consultancy firm PwC reveals that nearly half of households in Britain, approximately 12.5 million, live in areas where economic growth does not translate into a better quality of life. The study highlights a significant disparity in household spending power, with a stark North-South divide.
Researchers found that every region in the north of England, the Midlands, and Wales experienced lower spending power than the national average. In contrast, London and the South East comfortably exceeded this average. Specifically, households in the North East had spending power 6.6% below the national average, equating to £1,542 less per year. The North West and Yorkshire and the Humber also faced significant deficits. Conversely, households in the South East enjoyed spending power 9% above the national average, worth an additional £2,154 annually.
PwC defines household spending power by analyzing income after taxes and housing costs, factoring in household size and composition to estimate disposable income for other expenses. This metric is considered a key indicator of whether economic growth is improving living standards. Despite the UK economy expanding by 1.2% in the first six months of the year, the report indicates that only a small fraction of GDP growth leads to increased spending power for households.
The report also noted variations within regions, with Richmond in London having the highest average annual disposable income (£35,448), nearly double that of Hammersmith and Fulham. Scotland and the South West of England were identified as exceptions, with spending power slightly above the national average due to lower housing costs and smaller household sizes.
In response to these findings, the report suggests that future devolution efforts should empower local areas to retain more revenue from local growth and have greater autonomy in resource allocation. A government spokesperson pointed to initiatives like No10 North and the granting of financial powers to English mayors as steps towards reshaping national governance and boosting local economies. However, Conservative leader Kemi Badenoch has criticized certain growth strategies and the establishment of No10 North.