UK to see ‘worst real income drop in 100 years’
UK HOUSEHOLD incomes are set to fall 10 per cent in real terms in the next two years in the steepest such drop for a century, an influential think tank forecast last Thursday (1).
Inflation is currently at a 40-year high of 10.1 per cent with dire predictions that rates could climb to 18 per cent or more next year due to soaring energy tariffs.
The Resolution Foundation, which focuses on improving living standards for low and middle-income families, published projections that median real household incomes will fall 10 per cent between 2021-22 and 2023-2024. That equates to a loss of £3,000.
It blamed “global supply shocks and war in Ukraine” but also low productivity and earnings growth over the last decade.
The drop in real income “is likely to be the worst for at least a century”, the report said.
“With high inflation likely to stay with us for much of next year, the outlook for living standards is, terrifying,” said one of the report’s authors, Lalitha Try.
The Resolution Foundation urged the new government to implement policy change, proposing a lower “social tariff” for the most vulnerable.
The foundation said the predicted drop in real spending power “looks likely to be the worst fall in 100 years”, worse than seen in the 1970s or during World War II. It warned of a “grim winter”.
The drop comes as the average gas and electricity household bill is projected to go up from £1,500 in 2021-22 to £3,750 in 2022-23, the foundation said, although many households spread heating costs over the year.
Its forecast finds that some recovery is likely 2024-2025 but not enough to compensate for income losses since 2019-2020.