The outlook for living standards across Britain is bleak, with
typical incomes on track to grow by just 1 per cent (£300) over
the second half of the decade. But a fair economic tailwind and
the right policy interventions can transform this outlook –
turning a period of falling incomes for poorer families into one
of rising living standards, according to new Resolution
Foundation analysis published today (Thursday).
The Living Standards Outlook 2025, funded by Nationwide,
considers a range of scenarios for British living standards
across the income spectrum over the next five years. In the
central projection – based on forecasts from the OBR and Bank of
England, updated for recent outturns data – typical disposable
incomes after housing costs grow by just 1 per cent between
2024-25 and 2029-30.
Lower-income families are on course to fare even worse, with
incomes projected to fall by 1 per cent over the second half of
the decade. The incomes of the richest half of the population are
on track to rise by 1 per cent.
Housing tenure plays a key role in determining the outlook.
Mortgagors are on track to see their incomes fall by 1 per cent,
on average, as high interest rates continue to bear down on
households coming off fixed-rate deals. Outright owners will be
the tenure type to see the fastest boost to living standards, as
their incomes grow by 3 per cent.
Pensioners are set to fare best of all, with their incomes
forecast to rise by 5 per cent (£1,500), while families with
children are set for no income growth.
This projection for weak income growth over the second half of
the decade follows a rollercoaster first half, in which living
standards were rocked by Covid-19 and the cost of living crisis.
Britain then experienced a mini living standards boom, as incomes
grew by an impressive 4 per cent (£1,300) in 2024-25.
This living standards bust, boom and bleak outlook could leave
the 2020s as the first decade of the modern era to witness no
improvement in disposable incomes across Britain. While median
incomes grew by 18 per cent during the noughties, and by 9 per
cent during the 2010s, the Foundation projects zero growth
between 2019-20 and 2029-30.
The end of the 2020s is still a long way off, and the economic
outlook can improve, with policy offering a helping hand.
Should the current period of strong wage growth continue and
employment return to its previous peak, repeating the upside
living standards surprise of the 2010s, typical income growth
over the rest of the decade would triple to 3 per cent.
An uplift in economic growth would boost incomes for many British
families, but it would not do enough to lift living standards for
the poorest half of the country. There is more the Government can
do to put money in people's pockets.
The report finds that if the Government were to end the two-child
limit – which could be funded by a one year extension to the
personal tax threshold freeze – average incomes for the poorest
half of the country would rise by £200 instead of falling between
now and the end of the decade, as 500,000 children are lifted out
of poverty. The Government is right to prioritise growth to lift
living standards, but a stronger economy would need to be
combined with effective Government policy to boost living
standards for all British households.
Adam Corlett, Principal Economist at the Resolution
Foundation
“The living standards story of the decade so far has been bust
and boom, with Covid-19 and a cost of living crisis followed by a
much-needed recovery last year. But the rest of the decade looks
bleak, with typical household incomes set to grow by just 1 per
cent over the next five years.
“There are winners and losers within this weak outlook, with
pensioner incomes set to grow by a healthy 5 per cent over the
rest of the decade, while the poorest half of the population are
set to see their incomes fall.
“But a stronger economy and the right policy interventions can
brighten this outlook. Maintaining strong wage growth and
returning to pre-pandemic employment levels would make
middle-income Britain far better off, while ending the two-child
limit can lift living standards for poorer families.”
Notes to editors
- The Foundation's central forecast is based on recent
forecasts from the Office for Budget Responsibility (OBR),
amended with more up-to-date economic data. This assessment of
future living standards assumes that nominal pay growth falls,
unemployment remains relatively flat, and the Government
implements its current plans for tax and benefits. For more
information on the assumptions made in the different forecast
scenarios, please see The Living Standards Outlook 2025.
- Nationwide is the world's largest building society, with over
17 million customers, 16 million of whom have a current account,
mortgage or savings product, and are therefore members of the
Society. Nationwide is owned by its members and focuses on
providing banking products and services to its customers.
Nationwide has over 18,000 employees, including those based in
its headquarters in Swindon, and those working in its network of
over 600 branches across the UK.
