London: UK household incomes are set to fall 10 percent in real terms in the next two years in the steepest such drop for a century, an influential think tank forecast Thursday.
Inflation is currently at a 40-year high of 10.1 percent with dire predictions that rates could climb to 18 percent 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 percent between 2021-22 and 2023-2024.
That equates to a loss of £3,000 ($3,475).
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, frankly, terrifying,” said one of the report’s authors, Lalitha Try.
The finding comes as politicians vying to be the UK’s next prime minister face mounting pressure to come up with sweeping plans to help ordinary families.
Frontrunner Liz Truss wrote in The Sun newspaper that she would offer “immediate support”, without giving details.
The Resolution Foundation is urging the new government, which will be announced next week, 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.
The number of those living in “absolute poverty” is projected to rise by 3.1 million to over 14 million people by 2024.