Fall in UK living standards over, recovery will be slow - think tank

LONDON (Reuters) – British living standards have probably stopped falling, but there is little chance of a swift recovery to undo the damage from years of low pay growth and high inflation, a leading think-tank said on Thursday.

Touching on a key issue before 2015 elections, the Institute for Fiscal Studies said real median household income seems to have stabilised in the 2013/14 fiscal year, after failing to keep up with inflation for the past five years. Adjusted for inflation, household income is now 6 percent lower than it was before the financial crisis, the IFS said in a report.

Andrew Hood, an IFS research economist and one of the report’s authors, said continued sluggish wage growth and a new cap on welfare payments meant the recovery in living standards would be slow, even as high inflation subsides.

The IFS also found that real incomes of the wealthiest Britons has fallen by 9 percent since the financial crisis, hurt by slow earnings growth. The poorest saw a smaller decline, helped by welfare payments that, until now, have kept pace with inflation.

By contrast, people with lower incomes suffered more from inflation — there were big rises in the price of food and energy, which account for a large part of their spending. Better-off people tended to benefit from lower interest rates on their mortgages.

“This means that, although incomes at the bottom appear to have fallen less than incomes at the top, real living standards have fallen by similar amounts across the distribution,” the IFS said.

(Writing by William Schomberg; Editing by Larry King)

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Fall in UK living standards over, recovery will be slow - think tank