Fall in real incomes for households

30/06/11

By David Clement

Families are picking up the bill for the UK's economic slump as inflation outstrips pay rises, official statistics have confirmed.

The impact of price rises was shown by a slump on the savings ratio - the money left after consumption - from 5.1 per cent to 4.6 per cent over the quarter to March, according to figures from the Office of National Statistics (ONS).

And real incomes - adjusted for inflation - plunged 2.7 per cent in the year to the end of March, the biggest fall since 1977 when inflation was 15.8 per cent and the average house price was £13,650.

The ONS said household disposable income fell in real terms by 0.8 per cent in the three months following a fall of 0.9 per cent in the previous quarter - ramping up the pressure to get the best deal for household utilities and make every penny count.
   
Economists fear the household budget squeeze may have a domino effect among struggling high street retailers with TJ Hughes poised to follow furniture firm Habitat, fashion chain Jane Morman and Kitchen Direct's owner Moben into administration.