Over half (60%) of households in the UK saw their disposable incomes decline last month due to the job market cooling, according to the latest figures from the Asda Income Tracker, which is compiled by Cebr.
Families with the lowest incomes were hit the hardest, seeing their spending power fall by 4.2% compared to last year. This is the first time in over a year that their disposable income has fallen and leaves them with a shortfall of £71 per week between what they earn and what they spend on bills and living costs.
Although the upcoming rise in the National Living Wage may offer some relief, income growth for these households is expected to slow further due to cuts in social security and welfare payments.
The upcoming increase in energy prices is also expected to accelerate inflation in the coming months, which will likely add pressure on households that are already struggling to cover their bills.
In contrast, the highest-earning households are well-protected from such cuts and the cooling job market and remain largely unaffected by these pressures, causing the income gap to continue widening. These households have an average of £907 left each week after paying bills and essentials.
Sam Miley, Managing Economist and Forecasting Lead at Cebr, commented: “Spending power is likely to face further pressure in the coming months as a number of policy changes come into play. Increased energy and water bills, higher council tax, and rising employer costs are all expected to impact consumers, particularly those on lower incomes.”
