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UK workers will be worse off in 2024 than in 2019

UK workers living standards will flatline next year, leaving them on track to be 4% worse off heading into the next election than they were in 2019, according to a leading thinktank.

The Resolution Foundation, which focuses its research on low- to middle-income households, said in a report that “never in living memory have families got so much poorer over the course of a parliament”.

Higher mortgage rates, steep tax rises and a stagnant economy meant UK workers were on track before an expected election in 2024 to suffer the worst fall in incomes over a five-year period since the 1950s, it said.

Adam Corlett, the organisation’s principal economist, said stable incomes next year will relieve many households, but “the bad news is that the living standards outlook is still dire, with overall stagnation and further income falls on the way for less well-off households”.

In a separate study, economic stagnation next year will be compounded by slowing exports to Europe and the rest of the world following a decline in global trade and unique barriers caused by Brexit red tape.

The British Chambers of Commerce (BCC) said in its quarterly economic forecast that the UK had avoided a recession this year but with “several economic indicators now flashing red,” the next two years would bring “consistently low growth for UK workers”.

Analysts at the Resolution Foundation said the incomes of typical working-age households were on course to be 4% lower in 2024-25 than they were in 2019-20 – considerably worse than the 1% income fall recorded between 2005-06 and 2010-11.

The report looked at comparable UK data from the middle of the 20th century.

While some important elements of economic data were improving, with inflation having fallen from a peak of 11.1% last year to 6.8% in July and the Bank of England likely to halt its interest rate raising cycle within a few months, it said higher mortgage and rental costs, a rise in tax bills and restricted government finances would limit the recovery.

Inflation-adjusted gross pay is expected to rise by 2.9% for UK workers on average over the course of the parliament (2019-20 to 2024-25), but frozen tax thresholds mean that for the typical employee, post-tax pay will rise by just 0.6% in real terms over this period, it said.

The thinktank also noted some “big winners” during the election year, with a “savings boom” stemming from the sharp rise in interest rates.

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