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According to the Guardian, at the moment, the UK is suffering the worst fall in living standards since the record began.
The Office for Budget Responsibility has presented an updated economic outlook. The document unveiled that many UK households might face the biggest fall in living standards. Preliminary estimates showed that an unprecedented rise in inflation would tip the UK economy into a recession lasting more than a year. As a result, over 500,000 people may lose their jobs.
Experts at the OBR suppose that the UK economy will slump by 2%. What is more, the watchdog predicts a 7% drop in household incomes. “The drop in household spending power will be so acute it will wipe out the past eight years of growth,” analysts think. The fact is that wage rises fail to keep up surging inflation and interest rate hikes.
Apart from lower household incomes, UK citizens will also face a considerable rise in taxes. The OBR expects that taxes will jump by 37.1% of GDP, showing the biggest increase since the Second World War.
One of the members of the OBR’s budget responsibility committee said that the last few years had been “a dismal decade for UK growth.” “In the very near term, it was going to be a year of squeezed budgets for households,” he added.
In the next two years, the UK economy will shrink by 2%, the Guardian pinpointed. This may drive up unemployment by 505,000 in the second quarter of 2024. Meanwhile, the country’s GDP will return to its pre-pandemic level only by the end of 2024, analysts are sure.
It is the third considerable fall in UK living standards since the 1950s. Against the backdrop, British households will face additional problems. However, by 2024, house prices may slide by 9%, whereas the average interest rate on mortgage debt may peak at 5%.
Published 25 November 2022
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