Real disposable income per head fell 2% in first quarter of 2017 from year earlier, the steepest decline since end of 2011

Real disposable income per head fell 2% in first quarter of 2017 from year earlier, the steepest decline since end of 2011

Rising prices in the wake of the Brexit vote have put the tightest squeeze on household incomes for more than five years, according to official figures on Britons’ economic wellbeing.

Rising prices in the wake of the Brexit vote have put the tightest squeeze on household incomes for more than five years, according to official figures on Britons’ economic wellbeing.

In the opening three months of 2017, real household disposable income per head dropped 2% from the previous year. It was the steepest decline since the end of 2011 and driven by increasing prices of goods and services, the Office for National Statistics (ONS) said.

The figures add to evidence of falling living standards in the months running up to the general election when the Conservatives failed to win a majority.

Households have been hit by a double whammy of slow wage growth and rising inflation. The pound’s weakness since the EU referendum last summer has made imports to the UK more expensive and firms are passing their higher costs on to consumers. Inflation hit a four-year high of 2.9% on the latest measure.


That has meant a return to wages falling in real terms, which adjusts for the effects of inflation. Workers had already suffered years of declining real wages in the wake of the financial crisis, but then real pay started rising again in 2014.

The latest figures confirmed Britain was experiencing a renewed squeeze on living standards, said Dan Tomlinson, researcher at the Resolution Foundation thinktank.

“While no one expects it to be as bad as the last one, the fact that the fall in household incomes at the start of 2017 was the biggest in over five years is a huge cause for concern,” he said.

“The government needs to rise to this economic challenge, alongside tackling the political ones associated with ongoing Brexit negotiations.”

A spokesman for the Treasury said the government was already helping households, for example with the introduction last year of a higher minimum wage for workers over 25 known as the “national living wage”.

“We are taking real action to help families increase their incomes and take home more of what they earn. A basic-rate taxpayer now pays £1,000 less income tax than in 2010 and, thanks to the national living wage, the poorest households have seen their wages rise more than in any other G7 economy,” he said.

In its latest healthcheck on household finances, the ONS said that despite the hit to real incomes, consumer confidence had brightened in the first quarter of this year. 

Compared with the previous three months, people’s perception of the general economic situation improved slightly from a balance of -23.3 to -21.8. But the negative balance was still suggesting that households’ perception of the general economic situation was “unfavourable, potentially because of the decline in the UK’s currency and rising inflation”, the ONS report said.

Between the same two quarters, consumers also reported an improvement in their perception of their own financial situation. That balance increased from 0.7 in December 2016 to 1.2 in March 2017, the ONS said, using a survey conducted by researchers GFK on behalf of the European commission.

The report will add fuel to the debate over how content households are to dip into savings or to borrow in order to keep spending at the same pace. Consumer spending has been a key driver of UK growth and so pressures on household finances are widely expected to dent economic momentum this year and next.

Laith Khalaf, senior analyst at the financial firm Hargreaves Lansdown, said the findings suggested UK consumers “could be sleepwalking into financial difficulties”.

“The pressure is ratcheting up on UK households, but consumers don’t seem to be fully aware of the crunch that is under way,” he said.

“Despite weak wage growth and rising prices, consumers are continuing to spend by racking up more debt. That of course helps keep the wheels of the economy turning, but stores up problems for the future.”

The TUC said the figures showed Britons had enjoyed only a brief period of financial respite since the last squeeze on living standards.

“Britons are getting poorer,” said the TUC’s general secretary, Frances O’Grady. “Having just lived through the longest wage squeeze since Victorian times, their living standards are in freefall again. The government cannot sit on its hands and watch the crisis unfold. It needs to help create better-paid jobs in the parts of Britain that need them most. And lift the unfair pay restrictions on public sector workers.”

Labour’s shadow chief secretary to the Treasury, Peter Dowd, echoed the call for the government to remove the cap on public sector pay rises, which has seen teachers, nurses, police officers and other workers employed by the state fall behind those in the private sector.

Responding to the ONS figures, Dowd said: “It’s clear we need investment to create the high-skill, high-wage economy of the future. The Tories could start to help ease the burden on hardworking people by lifting their public sector pay cap, and end the cuts to in-work benefits.” es un sitio web oficial del Gobierno Argentino