Private incomes in the U.K. fell by almost 8 percent in real terms in the three years through March 2011 as earnings failed to keep pace with inflation and unemployment climbed, the Institute for Fiscal Studies said.
The drop left private incomes 5 percent below their level in 2003-04, the first year of comparable data, the London-based research group said in a report published today, citing government data.
The figures, based on incomes before taxes and benefits, underline the damage inflicted by the global financial crisis and the ensuing recession, which saw Britain lose 7 percent of its economic output in the deepest slump since World War II.
“Unless the economy performs much better than expected in the next few years, it looks likely that households’ private incomes will still be below their peak for some years,” said Jonathan Cribb, a research economist at the IFS.
Private incomes fell 1.1 percent in real terms in 2008-09 and by 2.8 percent in the following 12 months, reflecting higher unemployment, the IFS said. A 4.1 percent decline in 2010-11 was largely explained by a pickup in the rate of inflation, it said.
Unemployment benefit payments triggered by the recession provided some relief to households during the period, the IFS said.