How was your personal finance scorecard in 2016? Many will feel wounded by the Brexit result, but the reality is that 2016 has not been unkind to the pound in your pocket. Generalising about the personal experiences of 65 million individuals is wildly ambitious, but it has never put a newspaper columnist off before, so here goes …
Your wages went up
Average pay rose from £463 to £475 a week (£24,076 to £24,700 a year) excluding bonuses, according to the Office for National Statistics. That’s an extra 2.5% a year, although for the lowest paid the story was better, with a 7.5% rise as the National Living Wage of £7.20 was introduced in April for the over-25s, replacing the previous figure of £6.70. But if you generally don’t feel any better off, you’re right – the governor of the Bank of England admitted we are in the midst of a “lost decade” of wage growth, unknown for more than a century.
Prices stayed flat(ish)
Inflation, as measured by the CPI, was 1.2% in the year to November. So workers who enjoyed the average 2.5% wage rise should be 1.3% better off this Christmas. Not a lot, but better than recent years when inflation outstripped any miserable rise in pay. What’s really helped has been falling grocery prices – down 1.7% over the year, according to the British Retail Consortium, although Toblerone lovers suffered as it got gappier, and Marmite became the poster child of post-Brexit price increases. Petrol prices are also firmly on the up. This time last year we were writing about a festive boost as prices headed below £1 a litre, but now the average has shot up to £1.15. What’s more, that dusty old index, the RPI – the one the government prefers not to use because it always seems higher than CPI – is up 2.2% over the year so, on that basis, it nearly cancels out the average rise in wages.
House prices and rents started to cool
Longed-for falls in house prices have only materialised at the top end of the London market, but there are welcome signs that the steam is finally coming out of Britain’s over-inflated market. The average UK house price was £217,000 in October 2016, the last date the ONS has data for. Sadly, this is £14,000 higher than in October 2015, but month-on-month was unchanged. Prices in the City of London fell fastest, down 8.8% over the year. Most commentators are forecasting prices flat-lining in the UK next year.
Rental indices are notoriously unreliable, but there’s good news there, too. Average rents in the UK rose to £898 in November, up 3.1% over the year, but they fell in October. In London they were up just 1.6% over the year, with mounting evidence that they have been falling since the referendum result. And in a surprise, but hugely welcome, move announced in the autumn statement, letting fees to tenants are to be banned, although we don’t know quite when.
Investment Isas had a boom year
Stock markets soared in the wake of the Brexit result and the Trump victory, with the FTSE 100 index currently running 16% up over the year and the S&P 500 on Wall Street hitting a record high. Workers with defined contribution pension schemes will have seen the value of their savings increase, although pegged back by bond holdings where gains have been near invisible over the year, and negative recently. Much of the rise in UK share prices is down to the fall in sterling, but is welcome nonetheless.
But holidaymakers suffered
By mid-August the pound had fallen to just €1.15, down nearly a fifth on the summer before, and some bureaux de change were giving less than €1 for £1. Sterling has crawled back a bit, but foreign holidays look set to remain pricey.
What about 2017? Earnings growth is faltering and prices rising. Worse, the axe falls on tax credits in April, hitting the poorest families hardest.
Enjoy Christmas while it lasts.
