Family budgets squeezed in April as households report feeling worse off for the first time this year

Already-pressed families faced tighter conditions in April with low-earners and renters the worst hit, a report found today.

For the first time this year families reported their budgets had worsened. Four times as many households (32 per cent) reported a squeeze on their finances this month than those that said they saw an improvement in their financial situation (8 per cent), according to financial information firm Markit.



The overall Markit Household Finance Index reading for April was 37.7, down from 39.3 in March. It marks the first time this year that financial wellbeing worsened month-on-month. Readings above 50 indicate people's finances are improving and those below this point show a deterioration.



Budget squeeze: Four times as many people reported feeling under financial pressure in April than said they saw an improvement in their finances.

Markit, which interviewed 1,500 people across the UK, said worsening finances largely reflected an ongoing squeeze on cash availability for people on lower incomes, combined with higher living costs in April.

The figures coincide with sweeping Welfare spending cuts including the so-called ‘bedroom tax’ which came into force at the start of April.



Other reforms to welfare include the introduction of a £26,000 cap on the amount of benefits a household can receive, cuts to housing benefit for working-age social housing tenants whose property is deemed to be larger than they need and the replacement of disability living allowance by the personal independence payments. Working-age benefits and tax credits also rise by 1 per cent - a below-inflation cap

All income groups reported a sharper fall in their finances in March, and people earning between £15,000-£23,000 were particularly badly hit, as were those renting from local authorities and housing associations.

Graphs show household finances have suffered a bumpy ride - and turn negative again in April.

Just under 42 per cent of households expected their finances to worsen over the next 12 months, compared with 27 per cent who expected to see an improvement.

People living in the North East and the North West were the most pessimistic about their future prospects, while those living in the East of England were the most optimistic.



Public sector workers reported a slight drop in their employment incomes this month, while private sector workers saw a moderate increase. Manufacturing bucked the overall trend, with pay growth at its strongest in eight months.

Workplace activity has also been on the increase for three months in a row, with the strongest lifts being seen in the IT/telecoms and energy and transport sectors.

A widening gap has emerged between public and private sector workers in terms of job security. Public sector staff noted the most marked levels of job insecurity since January 2012, while private sectors were the least downbeat since the survey began more than four years ago.

Tim Moore, a senior economist at Markit and author of the report, said that weak household income growth compared with high living costs will continue to drag on consumers' ability to spend in the coming months.



Social renters have suffered more than other households.

He said: ‘April's survey highlights a deepening downturn in financial wellbeing, driven by renewed pressures on household income and another strong rise in living costs.

‘The worsening financial environment stood in contrast to reports from households of increased workplace activity and relatively subdued concerns about job security, especially among those in the private sector.’

Elsewhere, research from Halifax today showed half of people living in Britain feel worse off than they did a year ago.

Those in their 40s and 50s felt most under pressure, with 55 per cent and 60 per cent respectively saying that their budgets have deteriorated, compared with 49 per cent across all age groups Halifax said.

Couples with children were most likely to have run out of money at least once before their next pay day in the past year the research found. Halifax said 58 per cent of 30 year-olds, who were most likely to have small children living at home, admitted this had happened to them, while 57 per cent of those in the forty-something age group admitted running out of cash before payday.



Those in their 30s were also the least likely to save money at the end of each month at 58 per cent – the same proportion as teenagers.

This compared to households with people in their 60s, three quarters of which said they saved any spare cash.



Despite the continued tough economic climate and high living costs, nearly three-quarters (74 per cent) of households said they felt they were continuing to cope well financially. Those in their 60s also seemed to be managing the best, with 87 per cent saying they were getting by.





