UK Households £910 a Year Worse Off

Published on 1 January 1970 by Raffick Marday

Disposable incomes are expected to fall by 2 percent, new figures show, with households having £27.3 billion less to spend in total over 2011.

The Centre for Economic and Business Research (CEBR) released its forecasts predicting each household will have £910 less a year to spend.

This fall in disposable incomes was taken in conjunction with the 0.8 percent fall recorded in 2010 – the fall in 2011 is likely to be greater than those experienced in the 1930s, and the biggest fall excluding WW2 and the General Strike since 1921.

This, according to the CEBR, is due to high inflation and weak earnings growth. They expect the annual rate of inflation across 2011 as a whole to come in at 3.9 percent, which is the highest since 1992.

Earnings growth is likely to only rise to 1.9 percent in comparison, and unemployment is expected to remain high.

“We have been pointing out the pressures on household incomes for over a year, during which the underlying position has deteriorated as average earnings growth has remained very low,” commented Douglas McWilliams, CEBR Chief Executive and one of the report’s authors.

“The OBR now forecast that squeezed incomes will be offset by a record increase in indebtedness.”

Surging global commodity prices and the rise in VAT in January were seen as the main contributors to the high rate of inflation.

While rising prices of energy, cotton, metals, and other raw materials, along with supply side shocks and strong demand from emerging markets have also contributed towards this.

The CEBR states public spending cuts are only a minor squeeze on the household incomes in comparison.

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