Message from our CEO Andy Clarke
Five years ago we launched Asda’s first Income Tracker report with the Centre of Economics and Business Research. The report, which we have published each month ever since, seeks to better understand the monthly spending habits and discretionary incomes of families up and down the country.
As a company, Asda’s core drive is to understand and respond to the changing needs and circumstances of consumers. The income tracker helps us to achieve this, while also allowing us to speak up on their behalf. For five years, we have used the evidence we have gathered to highlight the way in which global economic developments impact the lives of every one of us.
Shortly after the first report was published, we faced the worst financial crisis since the Great Depression of the 1930s. The year 2008 saw the collapse of trusted institutions around the world, and the UK government’s bail-out of several banks. Five years on, it’s clear from the tracker and from speaking to our customers that the fall out from these events is still being felt. Since 2008, our Income Tracker has looked closely at the impact of the recession on household discretionary income. Over the first few years we saw large swings in how much spare cash people had in their pockets.
Today, the situation has stabilised, but making ends meet is still a struggle, as the cost of living has outpaced income growth every month since January 2012 – hitting the “squeezed middle” and the under 30s the hardest of all.
What is more, households face the spiralling cost of essential items like gas and electricity, housing costs, food and fuel, leaving a huge dent in their spending power. As a result, the average household now spends £2,808 a year more on essential items than they did in 2008. We remain a nation in the grip of austerity.
In spring this year, we narrowly avoided falling back into recession for the third time in five years. The signs of economic recovery appear promising and we have seen a modest improvement in monthly spending power, albeit far from its peak of £165 a week at the start of 2010.
However, while economists believe we may well be at the beginning of what will be a long path to recovery, over the last five months the Income Tracker has steadily declined. Any green shoots have yet to translate into more money in people’s pockets or greater consumer confidence. We know families are resolute, but until we see a more sustained improvement, we remain only cautiously optimistic.
As we expected, the squeeze on living standards has not been equally distributed across the regions. We’ve seen good news for families in the North East for example, where disposable income increased by 15.4% over the last five years – the fastest growth across in the UK. However, slow income growth and rapid inflation have eroded spending power in Northern Ireland – where disposable income has been hit the hardest. This special report to mark five years of the Income Tracker looks at regional variations in more depth; and not only tracks some of the trends in discretionary spending since 2008, but examines what the trends are likely to be over the next five years. As we see it, the challenge facing government over the years to come is to work ever harder to create the conditions for sustainable growth. As for business, we must provide quality goods and services at prices consumers can afford so their hard-earned income goes further – something that is key to Asda’s heritage.
What is clear from the report and from what people are telling us is that we have a long journey ahead of us. It will take both government and business working hard together to ensure the economic recovery has a real impact on the lives of British consumers.
Andy Clarke CEO and President, Asda Stores Limited