The Resolution Foundation predicts that the average Brit will be 4% poorer in the future, whereas wealthy retirees will be ‘big victors.’

According to a prominent thinktank, the living standards of British workers will stagnate in 2020, putting them on track to be 4% worse off heading into the next election than they were in 2019.

In a report, the Resolution Foundation, stated, “Never in living memory have families become so much poorer throughout a parliament.”

It said that higher mortgage rates, steep tax rises, and a stagnant economy meant UK workers were on track before an expected election in 2024 to endure the worst fall in incomes over five years since the 1950s.

Adam Corlett, the organisation’s chief economist, stated that next year’s stable incomes will relieve many households, but “the bad news is that the outlook for living standards remains bleak, with overall stagnation and further income declines on the horizon for less affluent households.”

“Next year’s economic stagnation will be exacerbated by slowing exports to Europe and the rest of the world due to a decline in global trade and distinct trade barriers resulting from Brexit red tape.”

The British Chambers of Commerce stated in its quarterly economic forecast that the UK avoided a recession this year, but “several economic indicators are now flashing red” and will result in “consistently low growth” over the next two years.

Analysts at the Resolution Foundation predicted that the incomes of typical households with working-age members would be 4% lower in 2024-25 than in 2019-20, significantly worse than the 1% decline observed between 2005-06 and 2010-11.

The report examined analogous UK data from the middle of the twentieth century.

Inflation declined from 11.1% last year to 6.8% in July, and the Bank of England will likely halt its interest rate-raising cycle within the next few months. However, higher mortgage and rental costs, increased tax bills, and constrained government finances will limit the recovery.

Inflation-adjusted gross pay is expected to increase by 2.9% on average throughout the parliament (2019-20 to 2024-25), but tax thresholds will remain frozen, resulting in a 0.6% real increase in after-tax pay for the average employee.

The think tank also identified several “big winners” during the election year, citing a “savings boom” caused by the sharp increase in interest rates.

A rise in surplus income from interest on savings to £90bn next year, equivalent to more than £3,000 per household on average, up from just £5bn in 2021-22, would benefit pensioners with savings and no mortgage the most.

The majority of the savings windfall will go to the tenth of households with the highest savings, who will receive approximately £20,000 each on average, while the half of households with the lowest savings will receive approximately £100 each on average, according to the foundation.

On average, households with members aged 65 to 74 are projected to benefit six times as much from the savings surge as those with members aged 35 or younger.

The number of people living in absolute poverty – below 60% of the median income for 2010-2011, adjusted for inflation – is projected to increase by 300,000 in the coming year and reach 12 million by 2024-25.

The BCC stated that this year’s modest upgrade to the UK economy’s growth rate forecast was overshadowed by sharp declines in business investment and weakening exports, thereby limiting growth to between 1% and 0% over the next two years.

David Bharier, the head of research for a business lobbying organisation, stated that small and medium-sized businesses were “struggling to rebuild confidence after three years of economic shocks.”

“Prolonged inflation, skills shortages, and new trade barriers with the EU have contributed to an environment of minimal or no growth.”

“A rapidly growing proportion of SMBs are now also concerned about interest rates, which have dramatically increased borrowing costs in many cases,” he added.

“With additional trade barriers looming, resulting in higher import costs and labour market tightness persisting, it is difficult to foresee how large-scale investment will be unleashed. Government and business must collaborate to create a clear economic path to encourage investment and development.”