LONDON — UK household incomes will not grow for the next two years due to the lasting effects of the 2008 financial crisis, according to a report from an influential think tank.
“If workers’ earnings grow in line with the OBR’s forecast, we project that real median income growth will be close to zero over the next two years, before picking up after 2018 — 19,” the Institute for Fiscal Studies said in a report published on Thursday,
The long-term impacts on economic growth from the financial crisis are likely to last until 2022, the IFS said.
Median incomes will have grown by just 9.7% in the 14 years since the 2008 crisis, according to IFS projections, which is almost a fifth lower than the long term trend suggests would have been the case if the banking collapse had never happened.
In this case, the “difference is equivalent to £5,900 per year for a childless couple and £8,300 for a couple with two young children,” the IFS said in its report, produced for the Joseph Rowntree Foundation.
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Any earnings growth will be unevenly distributed, with planned cuts to working-age benefits and the potential for higher inflation in the future hitting low-income households harder than high-income households, the IFS said.
A Treasury spokesman told the BBC: “We are taking action to support families with the costs of living by cutting taxes for millions of working people, doubling free childcare for nearly 400,000 working parents and introducing the National Living Wage — a significant pay rise for the lowest earners.”
The findings chime with data from the Office of National Statistics released last month that showed that UK household spending remained level at an average of £528.90 a week in the financial year ending 2016, unable to rise above pre-crisis levels.
The figures show “that in recent years spending has increased from its lowest level of £507.20 seen in 2012,” the ONS said.
“However, average spending has not returned to the pre-economic downturn levels of spending seen before 2007,” the ONS said.