THINK YOU’VE ‘NEVER HAD IT SO GOOD’? TEN YEAR STUDY WARNS BIG-SPENDING BRITAIN TO THINK AGAIN

· Real earnings growth at lowest in ten years and weighing on household budgets

· Families still not reining in spending despite real economic pressures

Half a century on from Harold McMillan’s memorable summing up of Britain’s good fortune (“Most of our people have never had it so good” - 20th July 1957), a ten year study published today warns the current financial reality is far worse than millions of families are prepared to face up to.

The Alliance Trust Research Centre’s report is based on an in-depth analysis of a range of economic conditions, from wage inflation and employment statistics to mortgage repayments and council tax. It concludes that, while the nation’s overall economic reality has improved slightly from its low point last winter due to falling utility prices and firm economic growth, families are still historically stretched overall and many are carrying on regardless in terms of their spending and borrowing.

Time for a financial reality check

Alliance Trust is urging British families to take a reality check on their financial situation, highlighting the following headline facts:

· Real earnings growth has reached its lowest level in the ten years of the study;

· Households have stepped up their spending over the past 12 months, fuelled by rising levels of debt;

· Alliance Trust’s Financial Reality Index, an ongoing measure of whether households should be spending more or less given the current economic climate, has only inched above its ten year low point of last winter, and households remain well short (18% below) of the financial comfort zone.

Shona Dobbie, Head of Alliance Trust Research Centre, said, “Far from never having it so good, we’ve seldom had it so bad, with homes squeezed by lower earnings growth, higher mortgage repayments and chronic council taxes, to name just a handful of issues. But British families continue to borrow big and spend bigger which confirms this reality just isn’t hitting home. It’s only really thanks to recent economic growth and lower utility prices that we’ve seen even a mild improvement in the predicament facing households.”

The chart below shows how consumers have accelerated their spending since last year despite a worsening financial reality, which has only just begun to recover.

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* Alliance Trust’s Financial Reality Index is based on a ten year quarterly analysis of 11 underlying national and domestic financial indicators, which together have proved a reliable ongoing predictor of consumer financial confidence and willingness to spend.  The index rose to 82.0 in the second quarter, from 73.7 in the first quarter.

Alliance Trust’s full report on the Financial Reality Index is available on www.alliancetrust.co.uk You can obtain a copy of the report by emailing contact@alliancetrust.co.uk or phoning 08000 326323.

Contacts

Jane Holligan, Media Relations Manager         Anna Schirmer/ Corrie Stirling-Aird

Alliance Trust                                                   Lansons Communications

Tel  +44 (0)1382 306064 Tel  +44 (0)20 7490 8828

Mobile  07745 783212 Email alliancetrust@lansons.com 

Email jane.holligan@alliancetrust.co.uk

Web www.alliancetrust.co.uk

Notes to editors

1. Alliance Trust PLC is the largest generalist investment trust company listed on the London Stock Exchange. Through its subsidiaries, Alliance Trust offers investment dealing, self-invested personal pensions and a choice of investment wrappers.

2. The Research Centre is part of Alliance Trust and was formed to carry out economic and social analysis to deepen our understanding of economies, markets and socio-economic issues.

3. Photographs of Shona Dobbie are available.