The Chancellor of the Bank of England in a recent speech clearly signalled the UK standards of living are set to fall as workers’ income is not keeping pace with inflation stoked by sources other than wage increases.
According to Roger Bootle, chief economic adviser to Deloitte, there are five principal reasons for the squeeze on consumers’ income:
1. Income in real terms is reducing as prices rise faster than pay and the trend is predicted to worsen over the coming year with pay freezes in place and inflation on an upward curve
2. Opportunities for work is reducing reflected by lowered numbers of people in employment and a reduction in working hours
3. Changing credit conditions mean that many people pre-2008 used to spend in excess of their income but now find themselves unable to obtain credit on reasonable terms
4. Those people who have savings are finding that low interest rates coupled with rising inflation is in effect eroding the real value of their savings
5. There is a pressure on what is called real wealth – this takes into account factors such as people who own their own homes… with assets such as houses having taken a tumble in value, and like wages, lagging behind inflation.
Tighten your belts for the next few years and clench your fists for a hard hit on your household budgets.