Retail prices rise 90-fold over the past century

13 February 2015

  • Purchasing power of the pound down by 98.9% in the past century
  • The price of a loaf of bread has increased 11171% in 100 years
  • The value of money has fallen, on average 5% per year since 1914

The value of money has fallen by 99 per cent in the last century, according to research from Lloyds Bank Private Banking1. The research shows that a 90-fold increase in retail prices means someone today would need £8,970 to have the equivalent purchasing power of £100 one hundred years ago.

Conversely, just £1.11 in 1914 would provide the same spending power as £100 today.  Over the course of the past century the purchasing power of money has eroded at an average rate of 4.7% per year. (See Table 1)

Value of money rose in the Twenties and Thirties, but has fallen since 1945

Prices doubled during the First World War, but in the 1920's and 1930's there was a long period of deflation when prices fell in eleven of the twenty years. This meant the value of money actually increased during a period of low growth and high employment.

Although prices again increased during the Second World War (by 50%), the rise was less marked than during the First World War (103%). Since 1945 retail prices have risen every year except 20092; prices were 39 times higher in 2014 than in 1945 with prices increasing at an average annual rate of 5.4%.

By far the most inflationary period in the past century was the ten years to 1984 when retail prices grew by 224% - or an average of 12.5 per year. In 1975 alone the value of money fell by nearly a quarter (24.2%) – the second largest annual decline in purchasing power in the past century; in 1917 prices grew by 25.4%. A combination of sharply rising oil prices and rapidly increasing nominal wages drove inflation during this period.

Ashish Misra from the Wealth Investment Office at Lloyds Bank Private Banking, commented: "Over the past one hundred years the large increase in retail prices has substantially eroded the purchasing power of the pound. In fact, the value of money has fallen, on average, by just under five per cent per year since 1914. 

"An individual today would need close to £90 million to have the same purchasing power as £1 million in 1914. In the current low interest rate environment it is important that savers and investors have the right information available to them to ensure their money goes furthest for them." 

The changing value of money is reflected in the cost of everyday items4. The average price of a loaf of bread has increased over 135 times, from 1p to £1.35 in 2014; a pint of milk from less than 1p to 46p (a 66 fold increase); and a dozen eggs would have been just 8p a century ago, but are, on average, £2.60 now.  And, for those who enjoy a nice tipple, the average price for a pint of beer has grown a staggering 294 times over the past 100 years, from an average price of just 1p in 1914 to £2.94 in 2014.  (See Table 2)Over the next 100 years, it is estimated that the value of money would decline by 94% if retail prices were to rise by 2.8%3 annually – the current annual rate of retail price inflation (RPI). In this event, someone would need £1,582 in 2114 to have the same spending power as an individual with £100 today.