Nearly one in three expect income cut
- 34% will save less and give up holidays while 42% scrap spending on luxuries
- Virgin Money launches Financial Outlook Index to monitor consumer outlook on spending and bills
Almost one in three people in the UK expects a drop in disposable income this year either through salary cuts or increased costs as the effects of the recession take hold, new research* from Virgin Money shows.
Virgin Money’s Financial Outlook Index shows 29 per cent of adults expect their income to fall over the next three months and the next 12 months.
And it revealed an alarming lack of confidence in consumers' ability to pay household bills and fund spending across a range of 16 key measures of financial health.
Up to 34 per cent are not confident they will be able to maintain or start paying into a savings account and the same percentage are not confident they will be able to book a holiday. Around 42 per cent are pessimistic about their ability to pay for luxuries such as designer clothes or new hi-tech goods.
But while spending is taking a hammering so is confidence in maintaining essentials – one in 10 are not confident they can keep up mortgage and insurance payments and one in five are pessimistic about being able to afford new clothes.
The Virgin Money Financial Outlook Index aims to track consumer spending habits as well as their ability to keep up with a range of key bills. It is designed to show how well or badly consumers are coping with the recession and to detect, where possible, signs of optimism.
It will also track consumers' expectations for a drop or rise in both disposable income and their salary, reflecting how the economy is impacting on peoples' real finances.
Virgin Money asked over 1,000 consumers to rate their confidence in their ability to pay for 16 different categories of goods and services including essentials such as clothing, groceries, mortgage bills, insurance payments and pension contributions but also non-essentials such as holidays, school fees and gym membership.
Other areas likely to suffer falls in spending in the coming months include eating out regularly and pension contributions, as consumers seek to further limit their expenditure. Around one in five people said they were very unconfident of being able to afford to eat out regularly in the next few months.
Rob Clifford, UK Managing Director of Virgin Money said: "The official declaration of recession and the grim daily toll of job losses and pay cuts has painted a picture of a relentless slide downwards.
"With 29 per cent of workers expecting a drop in disposable income over the next three months and next year, it is clear the mood is depressed throughout the country and likely to last for the foreseeable future.
"However, clearly not everyone is suffering the same and not all businesses are equal in the recession. Some still have money to spend but they are increasingly careful how they spend it.
The biggest losers in the next three months are likely to be any company operating in luxury goods such as consumer technology manufacturers and retailers, jewellers and designer clothing brands. However supermarkets have less to worry about and car and home insurers are less likely to feel the pressure."
| Virgin Money Financial Outlook Index | Very unconfident | Unconfident | Total | Representative No. of people in the UK |
|---|---|---|---|---|
| Luxuries | 30% | 12% | 42% | 15,528,000 |
| Pay into savings | 25% | 9% | 34% | 12,249,000 |
| Book a holiday | 24% | 10% | 34% | 12,484,000 |
| Eat out regularly | 19% | 13% | 32% | 11,871,000 |
| Pension contributions | 18% | 6% | 24% | 8,897,000 |
| Gym membership | 19% | 3% | 22% | 8,191,000 |
| Protection insurance | 16% | 5% | 21% | 7,623,000 |
| Non luxury clothing purchases | 10% | 10% | 20% | 7,201,000 |
| Reduce credit card bill | 12% | 7% | 19% | 7,024,000 |
| Non essential bills | 7% | 5% | 12% | 4,513,000 |
| School fees / financial assistance for children | 9% | 3% | 12% | 4,451,000 |
| Keep up loan repayments | 7% | 4% | 11% | 4,007,000 |
| Essential bills | 7% | 3% | 10% | 3,904,000 |
| Rent / mortgage | 7% | 3% | 10% | 3,613,000 |
| Home / car insurance payments | 7% | 3% | 10% | 3,653,000 |
| Groceries / food | 6% | 3% | 9% | 3,378,000 |
| Averages | 13.94% | 6.19% | 20.13% | 7,411,688 |
The picture is different across the country – 33 per cent of people in the Midlands expect their income to drop while 39 per cent of Scots are pessimistic about their ability to eat out and 38 per cent of people in the North West are not confident about booking a holiday.
Virgin Money’s Financial Outlook Index will run every three months and will ask people to rate their level of confidence in their ability to pay for a series of different goods and services. These are: luxuries, pay into savings, book a holiday, eat out regularly, pension contributions, gym membership, protection insurance, non luxury clothing purchases, reduce credit card bill, non essential bills, school fees, financial assistance for children, keep up loan repayments, essential bills, rent / mortgage; home / car insurance payments, groceries / food.
- Ends -
Notes to editors:
* TNS interviewed a nationally representative sample of GB adults aged 16-64 online between 20-22 January 2009. The sample has been weighted to represent the adult population of GB and data grossed up by TNS.
For further information:
Grant Bather, Public Relations Manager, Virgin Money
0207 111 1012
Kevan Reilly/Billy Partridge, Citigate Dewe Rogerson
0207 638 9571
About Virgin Money
Virgin Money is Virgin’s financial services arm and was established in 1995.
Virgin Money has over two million customers and offers a wide range of financial products across lending (e.g. credit cards and personal loans), savings (e.g. deposits, investments and pensions) and protection (e.g. life insurance, home insurance and car insurance) to the UK market.
Virgin Money Personal Financial Service Ltd is authorised and regulated by the Financial Services Authority (FSA). Registered Office: Discovery House, Whiting Road, Norwich NR4 6EJ. Registered in England no. 3072766. Entered on the Financial Services Register (www.fsa.gov.uk/register), Register Number: 179271