ONS have recently released some new experimental regional data which look at how households spend their money. These data are still in development, so users are advised to use them with caution at this time.
The data break down household final consumption by commodity for each part of the UK, as well as considering spending by foreign tourists in the UK and our own expenditures when we are tourists abroad. This is the second edition of this data that the ONS have produced, and there have been significant developments to this since the first edition, including more granular regional detail.
This analysis also lets us look at some interesting economic concepts like the savings rate and the household trade balance for the regions and nations of the UK with the rest of the UK.
This article provides a summary of these data.
We start by looking at overall per person consumption expenditure in the UK (Figure 1). Perhaps not surprisingly this is highest in London and the South East of England, but what is also striking is how little the pattern has changed between 2009 and 2018.
Scotland has fallen back a bit between these two periods, with London and the South East of England pulling away a bit.
Figure 1: Household Final Consumption Expenditure per head (UK = 100)
One of the nice features of these data are that we can explore the difference between total national and total domestic household demand, ONS define these as follows:
- National household expenditure measures the amount spent by all of the people resident in an area, regardless of where that spending takes place. It therefore includes spending in the area of residence, spending in other parts of the UK, and spending outside of the UK.
- Domestic household expenditure measures the amount of money spent in an area, regardless of who is doing the spending. It therefore includes spending in the area of residence, spending in an area by people living in other parts of the UK, and spending in the area by foreign visitors.
Perhaps unsurprisingly these data show that domestic household expenditure in 2018 in London was 129% of its national expenditure (Figure 2). In essence more money was spent in London by households living outside London than households in London spent elsewhere in the UK.
Figure 2: Domestic household expenditure as a % of national household expenditure
We can explore how the relative size of these two has changed across the UK between 2009 and 2018 (Figure 3).
Figure 3: Change in the ratio of domestic to total household expenditure by region
We can see that domestic household expenditure in Scotland is growing faster than total household expenditure between these two periods, resulting in the ratio increasing by 6%-points.
So the amount of money spent in Scotland, regardless of which households were responsible for that spending grew faster over this period than the amount spent by all of the people resident in Scotland, regardless of where they spent that money.
In discussing Figure 2, we mentioned that London had domestic household expenditure at 129% of its national expenditure, and in Figure 3 we can see that this has increased since 2009 by 7%-points.
The concentration of foreign tourism spending in London can also be illustrated directly using these data (Figure 4). More than 50% of tourism spending in the UK takes place in London. Scotland was the second highest recipient across the UK in 2018, although well back on around 10%.
Figure 4: Distribution of foreign tourism spending
Of course we can also look at the other side of the tourism impacts by looking at the distribution of UK residents’ spending abroad (Figure 5). Again London is the largest %, but as the part of the UK with the highest population this is hardly a surprise.
Figure 5: Distribution of UK residents’ spending abroad
A final interesting element to these data is a comparison of the savings ratio across regions and over time. For a number of parts of the UK the savings ratio in 2018 was a fraction of what it was in 2009 (Figure 6). Scotland, according to these data, saw its savings ratio fall from 7% to 4% between these two periods.
Figure 6: Savings ratio
The Scottish Government as part of their Quarterly National Accounts publication also produce a savings ratio estimate for Scotland – and it is useful to compare these two estimates. Figure 7. As we can see while the point estimates differ a little the general story that they tell about how the savings ratio has evolved in Scotland over this period is broadly the same. Notably the Scottish Government has data for this up to 2019, and so is more timely than the ONS data.
Figure 7: Comparison of ONS and Scottish Government savings ratio for Scotland
It’s great to see ONS producing these data and expanding our understanding of the economic inter-relations between different parts of the UK, and the scale of inbound and outbound tourism in the economy. Understanding the make up of household expenditure is also a key part of understanding the experience of households in different parts of the country to price changes in different commodities.
We’ve seen tourism cease during the recent CoVid 19 lockdown and these data give some idea of the relative importance of overseas tourism spend across different parts of the UK.
CoVid19 has been a major economic shock and no part of the economy has been unaffected. Household balance sheets have taken a significant hit – offset in the short term by furlough and self–employment support schemes – but there are further challenges ahead.
These experimental data from the ONS suggest that households in some regions had far lower savings ratios in 2018 than they had in 2009.
Of course, these are savings ratios for a particular year and things may have changed since 2018 –maybe 2018 was an outlier. Looking at the data year by year, it doesn’t look like this is a single year dip, but rather a trend since 2016.
These data serve as an early warning that the financial resilience of households across different parts of the UK might not be the same.