Yahoo Finance ‘Consumption crunch’: Young people spending less than they did in 2001, research finds
![UK economic growth will slow this and next year even if a no-deal Brexit is averted, according to the latest forecasts from the National Institute for Social and Economic Research.A Brexit with an agreement that would include a transition period of around two years is roughly as likely as a no-deal Brexit and as another delay in October, NIESR said on Monday. Overall, the think tank sees a 30 per cent chance GDP will decline over the course of 2020, and that probability will be higher if Britain crashes out of the EU.If a no-deal Brexit is avoided, NIESR predicts the economy will grow 1.2 per cent this year and 1.1 per cent next year as uncertainty about Britain’s future trading relationship with the bloc will continue to hold back investment, depressing productivity growth.According to official data, the economy expanded by 1.4 per cent last year. If Britain leaves the EU without a deal, economic growth will be 1 per cent this year and zero in 2020, NIESR said.The think tank has focused on what it calls an “orderly” no-deal Brexit, which assumes sufficient contingency measures - such as well-prepared trade infrastructure - are in place by October 31 and interest rates are cut as soon as Britain departs, to soften the economic blow.“We would expect GDP growth to fall to zero in 2020 and [consumer price] inflation to rise above 4 per cent in response to a lower exchange rate and accommodative monetary policy,” NIESR said.It forecast that the pound would sink below $1.20 or even lower and that unemployment would rise. Arno Hantzsche, senior economist at NIESR, noted that the preparations necessary to ensure an orderly no-deal Brexit would have to be stepped up “almost immediately”.“There is a risk that companies, households, even the government may be a little bit complacent this time compared with March because you had a similar situation before: deadlines were broken but it didn’t come to a no-deal outcome,” he said.NIESR’s forecasts - which, it warned, are particularly uncertain this time - diverge slightly from earlier predictions by the International Monetary Fund and the government’s spending watchdog, the Office for Budget Responsibility (OBR). In its latest World Economic Outlook compiled in mid-March, the IMF predicted that British GDP will grow by 1.2 percent this year and 1.4 percent in 2020 if a Brexit deal is reached - mirroring the forecasts in the OBR’s half-yearly economic outlook report, released around the same time. If Britain left the EU without a deal, it would fall into a year-long recession, the OBR said last week. This forecast was based on a type of a no-deal Brexit, outlined by the IMF, that assumes no border disruptions. The fund’s more severe scenario incorporates significant border disruptions that increase Britain’s import costs.On another point, NIESR appears to be in greater agreement with the OBR: the think tank said there is a 25 per cent chance that the economy is already in a technical recession, defined as two consecutive quarters of contraction. The OBR also said last week that the UK may be slipping into “a full-blown recession”.](https://s.yimg.com/ny/api/res/1.2/Bvvgzy0H0WvwkxP1paxRuw--/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTcyMA--/https://media.zenfs.com/en/the_independent_577/f567270eaecd6599751937bf65c5f104)
Young people today are facing a “consumption crunch” with their spending power less than it was in 2001, while baby boomers have experienced large gains in income, according to new research.
Those aged 18 to 29 are spending £380 per week on non-housing items, the Resolution Foundation found. The figure is 7 per cent less in real terms than what those in the same age group spent in 2001.
Over the same time frame, 20- to 64-year-olds have seen an 11 per cent jump in their weekly spending to £460.
Those aged over 65 have enjoyed a 37 per cent rise to £390 per week, meaning they now have more to spend than young, working-age adults.
The report also finds that young people are devoting a smaller of share of their spending to leisure activities such as restaurants, hotels and culture – which is down to £100 a week.
The Resolution Foundation’s first “intergenerational audit” highlights four additional “living standards challenges”, including lower wages for those currently in their early thirties whose careers have been hit by the financial crisis and its aftermath.
As well as falling consumption, home ownership among young families declined 66 per cent between 1989 and 2016 and is only slowly beginning to recover.
The report also highlights a “huge” gender wealth gap for baby boomers. Women in their late sixties have just over half the wealth of their male counterparts, largely thanks to differing levels of private pension savings.
Retirement of the large baby boomer cohort will require an additional £36bn of spending on healthcare and welfare provision per year by 2030, the Resolution Foundation warns.
“The big living standards gains that each generation used to enjoy over their predecessors have stalled,” said David Willetts, president of the Intergenerational Centre.
“But while Britain’s intergenerational challenges are big, they are not insurmountable. Welcome steps are already being made – from stronger pay growth for young millennials to the success of auto-enrolment into pension saving.”
He called for the “social contract between generations” to be repaired in order to bring the UK back together again.
