How London’s households are doing financially

According to the Institute for Fiscal Studies, Londoners can expect economic pressure in the coming months. A mid-October publication estimates a 0.1% reduction in real disposable income in UK households and predicts sharp rises in inflation in the last months of the year. Rising costs for necessities such as fuel for vehicles, electricity and natural gas have led to an already record high inflation of 4.2% in October. IFS points to Brexit, increased demand due to lifted Coronavirus restrictions and the continuing shortage of labor as key factors driving a “perfect storm” of price increases.

Wages and living costs

Despite this, many Londoners will still have plenty of money to spend. Independent groups have calculated a metric known as the Real Living Wage in an attempt to reflect the economic realities of living in both London and the UK in general. The separately calculated London salary comes out to £ 11.05 per hour. With 48 hours a week and 52 weeks a year, that equates to £ 27,500 a year, well below London’s average salary of £ 39,716. While the city’s poorest have been disproportionately affected by the pandemic, IFS Director Paul Johnson mentions that Universal Credit expansions and tax changes can actually narrow household income inequality.

Credit and lending

The days of state-sponsored emergency COVID loans are long gone. But there is good news: whether you have good or bad credit, My Quick Loan can be a short-term but wise solution for many households in the UK who may need some help in the current economic climate. And there is more good news: the Bank of England’s consumer credit data for September suggest that finances are recovering and that credit is still available. Interest rates on personal loans are rising, but they are still lower than they were before COVID-19 in January 2020, despite current inflation rates.

Economic scarring and room for hope

Today’s economic climate is complex, but there is room for hope. IFS mentions that the speed of economic recovery will have a major impact on the long-term damage. Government actions, including emergency loans, loan forgiveness, tax changes and public projects can have a major impact. According to IFS, the economy is currently reconfiguring. With the right support, they propose that the long-term financial damage of Coronavirus can be limited to half the 3% figure predicted by the Office of Budgetary Responsibility in March.

Lockdown-induced changes

In terms of individual finances, things are even more sinister. COVID caused significant lifestyle changes in many households, forcing changes and improvements in logistics, shipping and teleworking in many industries. The ability to work from home in many jobs allows households to save on transportation and potentially child care or rent. It’s easier than ever to get goods (and groceries and food) shipped cheaply to your doorstep. Wage increases may be limited to certain sectors, but workers in these areas will benefit from an increase in disposable income, giving them financial freedom to support other sectors through increased spending. Inflation, Brexit and the continuing impact of the Coronavirus will continue to have negative effects on the London economy, but it is not clear how large these effects will be.

The road to recovery

Prices are likely to rise this holiday season, but most Londoners have the tools they need to stay afloat. Universal credit extensions and salary increases will help some, while others will take advantage of relatively low interest rates to use loans to get through any difficult situations. Smart solutions from the lockdown era like video conferencing and getting things sent will help offset the rising cost of vehicle fuel for some. Many households will feel a pinch, but the economy is certainly starting to recover.