Disposable Income: How Have UK Spending Habits Changed After Lockdown?


Our spending habits and the way we shopped completely changed during lockdown. At the same time, household disposable incomes generally increased.

According to ONS data, average household disposable income in the UK increased by £700 between the financial year ending 2019 and FYE 2020 (April 5th). In the period before the first COVID-19 lockdown was implemented, the typical British household had around £30,800 in disposable income after taxes and benefits.

What did we spend this extra money on during lockdown, and how did these spending habits change after Freedom Day on 19th July 2021?

How Our Spending Habits Changed in Lockdown

Travel restrictions, social distancing and working from home meant we had different spending habits in lockdown. During this period, Brits spent a total of £40.6 billion on dispensable items to make their time at home more enjoyable. Takeaways and clothing topped the list, while homeware was also popular when it came to spending disposable income.

Dine-at-home experiences and takeaways were up, at-home entertainment soared and spending on home improvements increased too, as we all looked for ways to make our additional time indoors more entertaining. DIY beauty treatments and products also rose as we tried to recreate the salon experience in our abodes.

With in-store retail no longer an option, purchases moved online. During lockdown, sales of comfortable clothing reigned supreme with sales of hoodies, joggers and sweatshirts doubling. Workwear, party wear and spending on eating and drinking away from home was significantly lower, for obvious reasons.

Disposable Income in 2021

What have we been spending our money on now that most travel restrictions have ended, the UK has been free of lockdown restrictions for over six months, shops have reopened and we’re making our way back into the office? Have we gone back to our old spending habits? Are we bingeing to make up for lost time?

Following Freedom Day, we’re seeing a month-on-month rise in consumer spending. We’re enjoying heading back into restaurants, pubs and bars, heading out to events, doing some non-essential shopping and making the effort with our appearance. Here’s the month-by-month breakdown of the biggest changes in our spending habits once lockdown restrictions eased:

May: Image-conscious UK shoppers spent 8.5% more on clothing and almost 18% more on health and beauty products than in 2019.
June: Pubs and bars saw a massive 38.1% increase in spending as sporting events reopened to the public. We also spent more on fuel and UK hotels, resorts and accommodation as people looked to holiday closer to home. Spending on essentials grew by 14.7% this month with huge uplifts in specialist food and drink stores and face-to-face shopping, as we chose to spend time together again.
July: A quarter of people in the UK dipped into their savings to fund their post-lockdown lifestyle in the wake of our changing spending habits. This rose to 39% of 18–34-year-olds as nightclubs reopened and travel became more available. Pubs and bars saw another strong month.
August: Consumer spending grew across all sectors (except international travel). Non-essential spending rose to 15.9% as consumers spent more on socialising, travel in the UK and back to school planning. We also spent more on theme parks, taxis and clothes than in previous months as people continued to head out.
September: Consumer spending continued to grow in September 2021. However, 90% of consumers have expressed worry that the rising cost of everyday items will negatively impact on their finances. This has been bolstered by delays in fully stocked shelves across the UK and petrol shortages in some parts of the country. It’s not all doom and gloom though as pubs, bars and clubs saw a huge growth in transactions as people got together to socialise with colleagues following a return to the office. Health and beauty also grew during this time.

Millennial & Gen Z Changing Spending Habits

Millennials and Gen Z utilised their time in lockdown for self-improvement on both a personal and professional level. Between a quarter and a third claimed to have built healthier habits as well as decluttering (and selling possessions they no longer needed) and improving their finances. The lack of experiences available to them as consumers meant a complete change in spending habits, while some took the opportunity to move out of city centres during the pandemic.

Now that lockdown is over, there’s a stronger appetite for heading out and enjoying those experiences again from Millennials and Gen Z. Almost half of this age group expected to eat out at restaurants, attend events and visit concerts more often than before the pandemic. They also looked to travel as much as they did pre-pandemic.

However, it’s not all positive news on disposable income after lockdown for this group of adults. Millennials and Gen Z alike both feel less hopeful about their own future financial situation.

Property Prices on The Up

House prices have continued to rise in the UK, with the average house price increasing by almost 9% from April 2020 to April 2021. The pandemic took a toll on the number of properties available as people looked to change their lifestyle or location in line with their spending habits.

Working from home and hybrid working opportunities meant people have fewer geographical constraints than pre-pandemic, so rural properties and locations have become an option for many more budding buyers. Plus, measures such as the Stamp Duty holiday and low mortgage rates had an impact as prospective purchasers took advantage before house prices rose out of their reach.

According to the House Price Index, by the end of 2020, the average price of a property in London was £496,066 – meaning that a 20% deposit would work out at an eye-watering £99,213. The easing of lockdown has done nothing to buck this trend: as of July 2021, the average London property costs £510,299.

Even if Millennials saved 20% of their wage each month, it would still take an average of eight years and four months for one person to save enough for a house deposit. Whilst this growth has slowed slightly in London, the average deposit in the last 12 months has been 24%, a figure that feels out of reach for many even after a long period of spending less money on eating out, events and clothing.

However, home-buying schemes such as Shared Ownership and Help to Buy can assist purchasers who are struggling to get on the property ladder by offering alternative routes to homeownership.

“In stark contrast, saving to buy a Shared Ownership home can prove to be much more achievable for first time buyers. For example, if a couple can put aside £400 a month, then they could save for a deposit in a third of the time needed for a deposit on the open market.” – Nick Lieb, Head of Operations at Share to Buy

How to Save Money: Basic Ways to Boost Your Savings

• Track spending and set goals: If you want to start budgeting and keeping a closer eye on your spending habits, try keeping a list of debt and savings targets in your wallet to stay on track with a planned budget for the month. This is a good way to see how much you really spend on entertainment, travel and more.
• Stick to a list: One of the simplest money-saving tips is to decide what to prioritise by creating a list before you go shopping. The trick is to stick to it to avoid impulse purchases like chocolate or clothes.
• Prioritise spending: From health and beauty to takeaways and tech, prioritise spending habits from highest to lowest across each major category, and see where you can cut down. Try to spend money across just one of the categories each month.
• Create a waiting list: Help to reduce impulse spending and increase disposable income savings by creating a two-week waiting list for bigger purchases to see if they really are worth the spend.
• Use technology: Finance apps like Money Dashboard can help you stay one step ahead of your finances by tracking how much you save and spend.
• Recheck all your subscriptions: Stop wasting your disposable income through unused gym memberships, magazines, TV channels and more. Do an audit of every group or service you belong to and cut everything you no longer engage with by using a helpful app like Emma.
• Set short-term goals: Alter your spending habits by creating specific goals you can work towards, like cutting your entertainment budget from £300 a month to £200. If you’re looking to step onto the property ladder, use Share to Buy’s mortgage comparison tool to discover what kind of mortgage you could afford to begin setting your goal. Whether you fall into the average disposable income in the UK or not, any amount of savings is a good start!

Discover more about how Shared Ownership is helping first time buyers put their disposable income to good use by getting onto the property ladder with a reduced deposit.