Coronation and your cash: How much have prices – and life in the UK – changed since 1953?
When Queen Elizabeth II was crowned 70 years ago in 1953, the price of a pint was less than 10p, the average house price was around £1,800, and the average salary was £10 a week.
But that’s not all that has changed, this year’s Coronation of King Charles III takes place in a nation where life is different, and not just because of money.
The nation was still emerging from the shadow of WW II although a huge economic boom was on the way, with infrastructure investment in housing, schools and public services creating jobs and leading to a democratisation of assets.
Fast forward to 2023 and the UK is – post-Covid – struggling with high inflation and an apparent stagnation of the economy. Not to mention a cost of living crisis.
So was the UK better off then or now? Let’s take a look.
What has happened to house prices?
According to Sun Life the average cost of a new house was £1,891 (around £69,042 today) and the average salary was £10 a week (roughly £365) so buying a home was still very much .
Laura Frost, investment director at M&G Investments said house hunters on the eve of King Charles’ coronation will be paying a princely sum for their new home in comparison to those 70 years ago.
She said: “The average house price today is 130x higher today than in 1953. Pricess maintained relatively flat for the first 10 years of the Queen’s reign, but have seen sharp rises in the last 30 years.
Frost pointed out that home ownership is also considerably higher than the last time that Britain had a king. “The nation has been transformed from a nation of renters to a nation of homeowners, broadly, with 15 million of us owning our home compared to 4 million in 1952. However, to go back to the last time homes were as expensive relative to wages as they are today, you would have to travel back in time to 1876, when Queen Victoria wore the crown. “
“Currently, the average British home is approximately 9x wages, which is more than double the ratio in 1952.”
Better or worse? Probably worse. The circumstances which allowed so many people to get on the property ladder in the 1950s, the building of millions of new build homes, meant there was enough property to go round. Now, as a proportion of salary Brits are paying much more buy their homes. In London households now need a household income of over £100k to be able to afford their own place.
Some of the money fuelling the boom is via the Bank of Mum and Dad, which is helping the younger generation of property owners put down a deposit for their first property. It will be interesting to note what happens to property prices when the current older working generation X, and younger babyboomer cohort starts to retire.
Inflation and interest rates
Laura Frost pointed out that up until the last year or two, many of us have become used to low, two to three per cent inflation around the developed world.
“Following the bout of fiscal and monetary stimulus during and following the Covid pandemic things have changed of course, with CPI inflation currently in double digits.
“However, while we may have become used to a relatively benign inflation environment for some time, periods of low inflation are perhaps the exception rather than the rule. The UK saw a number of more challenging inflation environments during parts of Queen Elizabeth’s reign, particularly in the 70s, 80s and 90s.
And, while a Bank of England interest rate of 4.25 per cent is the highest we have seen in a while, over Elizabeth II’s reign interest rates hit a high of 17 per cent (1979). The low was 0.1% (2020).
Better or worse? Better. This week UK inflation fears appear to reignite but long-term trends, such as technology , globalisation and demographics have driven down inflation; although these trends could be reversing, such as attempts to bring trade closer to home.
Paying (a lot) more for a pint of beer
In the 1950s the UK population spent six per cent of their salaries on cigarettes; that is now just one per cent.
According to Frost drinking habits are pretty much the same as they were around the time of the last coronation; spending on alcohol only dropping one per cent to two per cent. Those still enjoying a pint of beer are paying a lot more for it though. We also spent a lot less of our income on clothing. Clothing accounted for a tenth of spending in 1952, but this has now fallen to 4 per cent as clothing has become more affordable.
The basket of good used to calculate the inflation rate has changed over the past 70 years.
In the 1950s sewing machines, table wringers, writing paper and ink were included in the ONS basket of goods and services used to measure inflation.
In the 2020s the basket includes fridge/freezers security cameras, smartphone handset, PCs and not forgetting frozen berries.
Frost added: “There have also been changes in views on health. Pipe tobacco was a staple with which Brits would have celebrated the coronation of the Queen, but now the e-cigarette has taken the spotlight. There have been changes in fashion sense too – no longer are the corset and smocked frock components of the basket.”
Better or worse? Maybe just different. “There are many items in the basket that would have seemed to be the stuff of make believe had you told those constructing the basket in 1953. Television subscription packages, package holidays and various takeaways comprise the 2023 basket, along with university tuition fees.”
Pension power
As people cheer “Long live the King” they will be hoping the same for themselves.
Life expectancy has risen by more than 13 years over the reign of Elizabeth and now stands at 81.77, said Frost
“The increase in life expectancy as well as medical advances has created the ageing population that the UK has today. This has knock on implications onto the economy and brings political decisions into question such as where to set the state pension age, which recently came under the spotlight in the background of the cost of living crisis.
“At the last coronation, the average person would only be able to enjoy their state pension for just over three years. By comparison, those just beginning their retirement today would on average draw their state pension for about 16 years. This large increase bears heavy on the welfare state, particularly given that the state pension accounts for approx. 42 per cent of welfare spending.”
Coronation inflation, and debt
One pound invested in gold in 1953would be worth £5593 today, not a bad investment, but gold only really became an investable asset in the 1970s.
Frost said: “It is noteworthy that gold prices remained very stable until 1971 when Nixon abandoned the Bretton Woods system, whereby the Dollar was pegged to the price of gold.
“The price of gold subsequently increased significantly over the following 50 years, so it could be argued that gold investors have President Nixon to thank for their healthy returns.”
“Interestingly, there is a clear correlation in the stability of the GBP-USD rate until the collapse of the Bretton Woods system, showing the impact of this global arrangement. After the fall of Bretton Woods, the chart shows that the Pound is a currency that has been waning as a currency of global importance. If Charles III were to sell the Imperial Crown today and spend the proceeds on a holiday to the US, his Sterling wouldn’t go as far as it would if his mother had done the same after her coronation.”
The start of King Charles III’s reign sees the UK’s debt to GDP ratio in a similar position.
“However, the trends are in opposite direction, with Debt to GDP coming down sharply following very high levels of indebtedness in the wake of World War II. History shows us that the ratio rises following times of national crisis which dictate a need for a significant increase in government spending. Charles III is coronated following a national crisis of a different kind,” explained Frost.
The Global Financial Crisis and Covid have caused the national debt to increase sharply and recently the ratio has surpassed 100 per cent once again after 55 years with the ratio in double digits.
“The coronation will be a national celebration, although it is clear that the UK is not the global superpower that it once was. A country that was losing its influence when Elizabeth came to the throne, but the evidence demonstrates that sterling is not a formidable force and that the Dollar is the currency of the day. What will these charts show by the time the next coronation comes round?”
Better or worse? Time will tell, although more of us living longer, initiatives such as auto enrolment mean more of us are saving for our retirement, and the introduction of Individual Savings Accounts (Isa) in the 1990s does mean more of us are able to put aside something for our futures.
Here are some suggestions of unroyal things to do in London this Coronation weekend.