UK Stuck in Decade of Stagnating Living Standards, Report Says

Commuters cross London Bridge in view of the Tower Bridge in London, U.K., on Monday, Dec. 14, 2020. The topsy turvy trade talks between the U.K. and the European Union took another somersault on Sunday when Boris Johnson and Ursula von der Leyen gave negotiators another shot at closing a deal. Photographer: Hollie Adams/Bloomberg Photo by Hollie Adams /Bloomberg

Article content

(Bloomberg) — British household incomes are set to stagnate in the 2020s, according to a new report, making it the worst decade for living standards in the past 60 years.

Article content

A Resolution Foundation analysis found that a typical UK family is projected to receive a mere £300 ($409) boost — a 1% increase — in its real disposable income in the five years to 2030, after adjusting for housing costs. Household budgets whipsawed in the first half of the 2020s when the pandemic and the cost-of-living crisis were followed by a period of strong wage growth.

Article content

Article content

Article content

From the start of the decade to its end, the think tank said real disposable incomes would be effectively flat. The report will make uncomfortable reading for the Labour government which promised to lift economic fortunes across the country after last year’s landslide election victory.

Article content

Article content

“The living standards story of the decade so far has been bust and boom, with Covid-19 and a cost of living crisis followed by a much-needed recovery last year,” said Adam Corlett, principal economist at the Resolution Foundation. “But the rest of the decade looks bleak.”

Article content

Britons have enjoyed real-wage growth for nearly two years but lacked the confidence to spend. Bank of England Governor Andrew Bailey warned this week that cautious consumers are weighing on the UK’s economic outlook, as interest-rate setters shifts their focus from international to domestic pressures on inflation and growth.

Article content

Housing will be a key determinant of a family’s economic fortunes in the second half of the 2020s. Those with mortgages are expected to experience a 1% decline in living standards as more people remortgage at higher rates in the coming years. At the same time, pensioners are on track for a 5% increase in their incomes, or about £1,500.

Article content

“The government has set itself the welcome – if historically unambitious – goal of raising living standards by the end of the decade,” Corlett wrote in the report. “But with falling employment and rising energy bills, and with fresh headwinds to come from heightened trade uncertainty, it’s no wonder that voters aren’t happy, with the cost of living their top concern.”

Article content

His analysis uses economic forecasts from the Office for Budget Responsibility and the Bank of England.

Article content