UK households will be £1,300 a year worse off in real terms in 2018 compared to 2009 when spending power was at its peak, as rising costs, stagnating pay and austerity measures continue to squeeze disposable income, a major new report by Asda warns today.
The report, launched today to mark five years of the Asda Income Tracker at a panel debate at London’s City Hall, looks at how families/people have been affected by the economic climate over the last five years, as well as looking ahead to the next five years. The research was carried out by the Centre for Economic and Business Research and finds that in 2013, the average UK household is £868 a year worse off, in real terms, than they were in 2009.
Furthermore, the level of household discretionary income is likely to stand at or below the current £160 a week mark until the last quarter of 2018, when it will begin to rise above this level once more.
However, when the effects of price rises in non-essential items is also considered, the spending power of the average UK household will be falling further: this £160 a week will buy less each year. By 2019, the average UK household will have just £147 a week of real disposable income in 2012 prices, down £25 a week on the levels seen in 2009.
Stubbornly slow income growth and rising inflation will continue to be the big factor to the squeeze on living, with price inflation on essential items expected to outstrip pay every month until 2018. As a result, over the next five years the average UK household is expected to spend £3,900 a year more on essential items – like housing and utilities (up £652 a year by 2018), transport (up £663 a year by 2018) and mortgage interest (up £599 a year by 2018)- than they do today.
Continued weaknesses in the labour market will also add to the squeeze. Wage growth is unlikely to top pre-recession levels (4%) in the next five years. Although private sector job creation is expected to bring down joblessness, public sector cuts are forecasted to prevent the unemployment rate from falling beneath 7% over the next five years.
For more information and the full report, please see Asda’s mini-site.