UK households' optimism towards future finances improve in Q2

According to the report from IHS Markit, despite the extension of some lockdown measures across the UK, household finances showed continued signs of improvement in the second quarter of 2021. There were improved trends for savings and a more positive outlook towards the longer term, as the easing of lockdown restrictions in Q2 helped firm up household balance sheets. Sentiment around job security and income picked up, as workers from many shutdown sectors returned from furlough.

The headline seasonally adjusted index – which measures households’ overall perceptions of financial wellbeing – rose from 42.0 in Q1 to 44.7 in Q2, signalling the weakest deterioration in UK household finances since the Covid-19 pandemic began. Monthly data pointed to a strengthening performance over the course of the quarter, with June's reading the highest seen since last February. The reduced financial strain in the second quarter also fed through to a strong rebound in sentiment towards household finances over the next 12 months. For the first time since Q1 2016, UK households expect their financial wellbeing to improve over the coming year, with 18–34-year-olds particularly upbeat about their financial outlook