Families 2% worse off in 2011, says CEBRNew figures show a fall of £910 per household
12 April 2011
The average family is facing the biggest peace-time squeeze on their finances since 1921, according to a forecast by the Centre for Economics and Business Research (CEBR).
The new figures estimate that households will have £27.3 billion less spending power in 2011 than in 2009 - a fall of £910 per household. The CEBR suggests the UK is now seeing a bigger decrease in household disposable incomes than in the 1930s - aside from World War II and the General Strike, it's the biggest drop since 1921.
The report estimates that the fall in disposable incomes equates to an overall drop of 2% in 2011, following a decrease of 0.8% to household budgets in 2010.
Budgets hit by high energy costs
The fall in real disposable income is said to be a result of high inflation and weak earnings growth. The CEBR expects the annual rate of inflation across 2011 to be 3.9% - the highest since 1992 - while earnings growth will edge up to just 1.9%, as unemployment remains high.
The high rate of inflation is attributed to surging global commodity prices and the rise in VAT in January. The rising prices of energy, cotton, metals, food and other raw materials are also major factors according to the CEBR.
GDP growth slow
The CEBR says that the lower spending power means that the economy will only grow by 1% in 2011, and will be 'subdued" for the next two or three years.' It's forecast is below the 1.7% predicted by the government's Office for Budget Responsibility.
With shopper remaining cautious, many retailers have recently reported harsh conditions on the high street this year, with HMV last week issuing its third profits warning since January.
Which? Money saving tips
Which? Money can help you stretch your money further, will our expert guides on everything from Ways to cut the cost of domestic travel to all the best Ways to get free stuff this spring.
Meanwhile, if you struggle to keep track of your finances, be sure to check our expert reviews of personal finance software for your home computer and read out How to plan an effective budget advice guide.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.