Expenditure by household income- highest quintile

IBISWorld estimates that expenditure by the top income quintile of households will increase at a compound annual rate of 6.9% over the five years through 2025-26 to reach £355.70 per person per week. The high growth rate is the result of the pandemic in 2020-21 causing a significant drop in household spending. In 2025-26, spending is expected to creep upwards by 0.6%.

Spending by the highest income quintile has grown consistently over the past two decades, except in 2007-08 and 2009-10, when the global financial crisis caused a recession in the United Kingdom. Over the first half of the period, rising house prices and low interest rates have disproportionately benefited the highest income quintile of households, who are more likely to be homeowners than other income groups. Homeowners become more confident as their assets rise in value and can release more equity from their homes. Even so, the economic uncertainty in the lead-up to Britain's departure from the European Union caused those in this group to hold back on spending causing expenditure to slow in 2018-19 and fall in 2019-20.

Among the highest income quintile of households, almost all areas of spending fell in 2019-20. The most significant falls were in education and household goods and services, respectively 24.6% and 18.6%. Expenditure on housing, fuel and power and alcohol, tobacco and narcotics rose the most, at 6.5% and 4.8%, respectively. In 2019-20, the top income quintile of households had an average total income of £135,116 per year, which after direct taxes and benefits, amounted to a disposable income of £96,731.

In 2020-21, expenditure fell considerably because of the coronavirus outbreak. This is because those in this group reduced their spending on several fronts. For example, the government-imposed lockdowns meant that people were required to work from home throughout the year, reducing car purchases and transportation expenditures significantly. The closure of eat-in restaurants and cafes and non-essential retail stores also reduced expenditure. According to the Bank of England, spending from consumer accounts decreased by 30% during the first national lockdown. These measures remained in place throughout the year, reducing expenditure by 20.1% in 2020-21. As lockdown restrictions eased over 2021-22 and businesses could reopen at total capacity, spending expanded by 18.8% over the year. In the 2022-23, spending surged by 9.9%, in line with inflationary pressures. While the cost-of-living crisis is set to squeeze spending by lower-income households, the highest earners will not be as severely affected, allowing them to continue to increase their spending.