6 MARCH 2014
Value of the pound in your pocket declines by over
90% since 1973
£1 million in 1973 would provide same spending power as £10.5 million today
A pint of milk has increased by 667% in 40 years
£100 in 2053 could be the equivalent of £311 today
The value of money has fallen by 91 per cent over the last 40 years, according to new
research from the Lloyds Bank using data from sources including the Office for National
Statistics (ONS).
The research shows that a more than tenfold increase in retail prices means that someone
today would need £10,553,000 to have the equivalent purchasing power of £1,000,000 in
1973. On the flip side, just £9.48 in 1973 would provide the same spending power as £100
today.
The purchasing power of money has eroded at an average rate of 6.1% a year over the past
40 years. By decade, retail prices grew the most rapidly between 1973 and 1983 at an
annual average rate of 13.6%. The lowest increase in inflation came over the period 1993 to
2003 with an annual increase of 2.6%. In the past decade to 2013, inflation has averaged
3.3% per year.
Table 1: Today's equivalent to £1m in the past:
£1 million in
Equivalent spending power in 2013
1973
£10.553m
1983
£2.944m
1993
£1,778m
2003
£1.380m
2013
£1.000m
Source: Lloyds Bank calculations based on ONS figures, February 2014
The changing value of money is reflected in the cost of everyday items. The average price for
a pint of lager has grown 20 fold over the past 40 years, from an average price of 14p in
1973 to £2.87 in 2013.
The prices of essential household items have also risen substantially since 19731 with the
average price for a loaf of bread increasing over twelve times, from 11p to £1.30 in 2013; a
pint of milk from 6p to 46p (667% rise); and instant coffee from 28p to £2.67 in the 40 years
to 2013 (See Table 2).
The average price for a detached property has risen approximately eighteen times over the
same period from £16,980 to £305,3912, while a troy ounce of gold has increased 30 fold
from £34 in 1973 to £1,051 today. Similarly, fuel costs have risen substantially with diesel
prices now 18 times higher than in 1973.
Looking to the future, if retail prices were to rise by 2.8% annually3, the value of money
would decline by a further 67% over the next 40 years. In this event, someone would need
£311 in 2053 to have the same spending power as an individual with £100 today – or over £3
million to enjoy the equivalent lifestyle of a person with £1 million today.
Ashish Misra, Head of Investment Policy at Lloyds Bank Private Banking, said: "There is no
doubt that the value of money has fallen dramatically since 1973 as a consequence of the
substantial rise in the general level of prices. It is likely to be reduced significantly further
over the next 40 years even if inflation is kept firmly under control.
"One million pounds is still a lot of money even though inflation has substantially eroded its
purchasing power over the past four decade. Although £1 million cannot fund the lavish
lifestyle it once could, it can still go a long way with careful financial planning."
Table 2: The changing cost of everyday items, 1973 - 2013
Estimated
Average price
1973 (£)
Average price
2013 (£)
% change
1973-2013
Draught lager, per pint
£0.14
£2.87
1948%
Bread: white loaf, sliced, 800g
£0.11
£1.30
1082%
Apples, dessert, per Kg
£0.28
£2.02
622%
Milk: Pasteurised, per pint
£0.06
£0.46
667%
Sausages: pork, per Kg
£0.58
£4.84
735%
Butter: home produced, per 250g
£0.13
£1.42
992%
Carrots, per Kg
£0.11
£0.91
723%
Sugar: granulated, per Kg
£0.11
£0.93
787%
Coffee: pure, instant, per 100g
£0.28
£2.67
853%
Eggs: size 4 (55-60g), per dozen
£0.33
£2.78
743%
Self raising flour:per 1.5 Kg
Vehicle fuel: ultra low sulphur diesel,
per Litre
£0.15
£1.19
724%
£0.08
£1.41
1727%
£16,980
£305,391
1699%
£34
£1,051
2952%
Detached house, UK average
Gold: Troy Ounce
Sources: ONS (all items except detached house and gold); Detached house - Halifax; Gold - Thomson Reuters
Datastream with Lloyds Bank calculation to convert from US$ to sterling. (February 2014)
- Ends Editors' Notes:
Notes:
Most of the calculations in this release are based on ONS inflation figures. Source: ONS, February
2014 Long term indicator of prices of consumer goods and services (code: CDKO). Gold prices from
Thomson Reuters Datastream. Detached house prices from Halifax.
1The changing cost of everyday items have been sourced from the ONS 'RPI average retail prices of
selected items' data (1914:2004) and February 2014 (for 2013 data).
2 Calculation based on the average price of a detached property in the UK was £16,980 in 1973 and
£305,391 in 2013 Quarter 4. Source: Halifax and CLG estimates February 2014.
3 Annual rate of retail price inflation (RPI) of 2.8% is estimated to be
consistent with the Government's target for consumer price inflation (CPI) of 2%. This is based on the
historical data between January 1992 and December 2007 (i.e. outside recession periods) when CPI
inflation averaged 2% and RPI inflation 2.8%, a spread of 0.8%.
Any views expressed within this report are our current in house views as at 13 February 2014 and
could be proved wrong and should not be relied upon as fact.
Ends
"This report is prepared from information that we believe is collated with care, however, it is only
intended to highlight issues and it is not intended to be comprehensive. We reserve the right to vary
our methodology and to edit or discontinue/withdraw this, or any other report. Any use of this report
for an individual's own or third party commercial purposes is done entirely at the risk of the person
making such use and solely the responsibility of the person or persons making such reliance. © Lloyds
Bank all rights reserved 2014"
Laura Ellman
[email protected]
020 7356 2200 / 07786 335 317
Bart Nash
[email protected]
020 7356 1975 / 07788 354 525