Citywire for Financial Professionals
Share this page:
Stay connected:

Citywire printed articles sponsored by:

View the article online at

Why you're probably going to be skint this year

The shopping is going to cost us all more this year, and here's why, says author of 'No Spend Year'.


by Michelle McGagh on Feb 09, 2017 at 16:18

Why you're probably going to be skint this year

Sorry to be the one to tell you, but it looks like we’re all going to have less money in our pocket this year and that has serious implications for the economy.

Despite the surprise news that the UK economy had grown 0.6% in the last three months of 2016 – ignoring fears that the impact of Brexit would have us stumbling backwards – the powers that be (economists!) believe that there’s a bigger problem that’s bubbling under the surface.

Of course, they’re happy that GDP (gross domestic product – which is used to measure whether the economy is going backwards or forwards) is up, they’re less happy about why it’s up.

That reason is you and me, and in particular our spending habits.

Andrew Goodwin of Oxford Economics said consumer spending in the second half of last year is what kept the economy afloat. We did our duty and hit the high street even though there was already a squeeze on our finances, thanks to falls in the value of the pound that meant our money didn’t stretch quite as far as imports became more expensive to buy.

When your money doesn’t go as far as it did, you’re feeling the effects of inflation: in other words, things cost you more.

The problem is that although you might already be feeling the pinch, things are going to get worse. According to Goodwin, when a currency falls as much as the pound did last year, then the impact of that takes a year to come through.

He warned that inflation could rise to 3% in the second half of this year, and to put this into context, it’s just 1.6% now (that is still below the Bank of England’s target of 2%, although no one seems to bother paying attention to that anymore!).

In short: things will get more expensive this year and this will have a huge impact on what we can afford to buy.

And we won’t be able to borrow more in order to spend more, as many people have got used to doing. We’ll all be too worried to borrow for fear of failing to pay the loans back (especially if interest rates rise), and the banks are unlikely to lend out more anyway.

It’s not good news so far, and there’s more dreariness to follow.

Even though the cost of living is going up thanks to inflation, wage growth is expected to remain in the doldrums.

It’s predicted to remain at around 2% to 3%, rather than hitting the pre-financial crisis levels of 4% or 5% a year. So not only will our spending money (or disposable income) be squeezed, so will wages.

It’s bad news for all of us and means we’ll all have to tighten our belts, look at our budgets and be more careful with our cash. And it’s definitely not a good idea to borrow money just to spend it on things that you don’t really need. Even if consumer spending is good for the economy, it’s going to be a hindrance to your household finances.

So what will the impact on the economy be? Well, it could mean lower growth for a substantial number of years, and Goodwin predicted as many as five ‘gloomy’ years.

You might be wondering what this has to do with you. If the economy doesn’t grow, then there’s a good chance your wages won’t either and companies are less inclined to invest and expand meaning there are fewer job opportunities. Worst case scenario sees companies laying people off as they try and cut costs.

It also makes it harder for the government to get the country’s finances back on track which could mean more spending cuts and even more austerity – as if the seven years we’ve already had isn’t enough.

There isn’t much you can do about economic slowdown, unless you’re spending an awful lot of cash satisfying a shoe addiction, but you can get your own finances in order.

Pay down debt, budget, put some money aside for an emergency (three months’ bills is a good start), and know that you’re prepared for when we all have less cash in the bank.

14 comments so far. Why not have your say?


Feb 09, 2017 at 17:30

You're not sorry at all ..admit it

report this


Feb 09, 2017 at 18:07

What is the point of this article?.. one life love why are you so frightened to live it ?

let's make this country great again... onward and upwards I say..cheer up

report this

Raj K

Feb 09, 2017 at 18:41

yes be of good cheer!

report this

Anonymous 1 needed this 'off the record'

Feb 09, 2017 at 20:34

What a load of Tosh

report this

richard tomkin

Feb 10, 2017 at 00:20

A cute Cassandra,she!

report this


Feb 10, 2017 at 08:03

The last para is OK, but the target audience does not seem to be the financially-aware readers of Citywire.

report this

Mr Debonair

Feb 10, 2017 at 08:16

Surely articles like these are also part of the problem and discourages the spending we need in the economy?

report this

Alan Tonks

Feb 10, 2017 at 09:46

This is a total non-story, fit only for reality television mentality

report this

In the Dark

Feb 10, 2017 at 22:35

The last sentence is the only bit of the story that is note worthy but out of place on the citywire pages, I think.

Perhaps the Government could form a think tank on debt reduction and invite bankers and economists to do some brain storming. Oh what fun listening to the two faced society explaning the bleeding obvious.

report this

Raymond Hurley

Feb 11, 2017 at 11:42

Did the Michelle McGagh get paid for writing this.

Really,it;s just a lot of cliches strung together.

The author also seems to have difficulty with the definition of GDP.

report this

richard tomkin

Feb 11, 2017 at 13:44

What did you expect from a Guardian columnist,especially one with too much time on her hands? What a litany of drivel.

report this


Feb 11, 2017 at 14:23

I wont have "less cash in the bank" i'll just clean a few more window's.....what a complete defeatist you are ....and a terrible example to other's ...for goodness sake i'm now shouting at my computer as well as the on earth did we win the war....oh that's it, the people who have the complete opposite thinking to you helped us.

report this


Feb 12, 2017 at 10:08

..Ever considered making a real contribution to society? there are plenty of cleaning jobs particularly in a rather large institution under intense pressure at the moment, or indeed care work where there will be increasing vacancies which i'm sure will not only improve your financial situation no end but crucially change your attitude to life completely.

report this


Apr 07, 2017 at 03:00

Does this person live in the real world?

Last time I visited a supermarket £1 could get you 4 1/2 Kg of potatoes or 3Kg of carrots or onions (Morrisons).

Certain discount supermarkets have various veg at 29pKg

You can get Leg of lamb or salmon for £5Kg

I've never known food so cheap

And if you get a bike and cycle a bit you might save on petrol

I've got moor money in my pocket and I'm going to invest it in the 60 + new breweries in my county

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Sponsored By:

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

Latest from Investment Basics

See all headlines

Sorry, this link is not
quite ready yet