An estimated 1.5 million UK households are predicted to struggle with energy and food bills higher than their disposable income from 2022-2023, according to a report from the National Institute of Economic and Social Research (NIESR).
The institute pointed out the pressure rising prices and higher taxes placed on consumer budgets, with the highest levels of difficulty projected to hit London and Scotland.
The think tank further commented that the combined impact of Brexit, Covid-19 and the war in Ukraine’s shock to the energy market would drag GDP to levels of 3.5% growth in 2022, declining in Q3 and Q4, with a 0.8% rise in 2023 and an uptick of 0.9% in 2024.
NIESR estimated that GDP would return to 1.5% by 2026, marking slow rates of growth even by recent historical standards.
The organisation also confirmed projections of CPI climbing to 7.8% in 2022, with a peak at 8.3% in Q4 2022 and an RPI inflation at 14.4% in the same period, representing the highest level since 1980.
The group said it expected real incomes to decline by 2.4% this year, along with an uptick in unemployment to 5.1%.
However, NIESR commented that it anticipated private consumption growth of 4.7% on the back of the £200 billion in estimated household savings accumulated over the Covid-19 pandemic, smoothing spending patterns and ensuring consumption rates declined by less than income.
The institute called for Chancellor Rishi Sunak to facilitate an emergency support package to soften the income shock blow, and recommended a universal credit boost of £25 per week between May and October 2022, which would cost approximately £1.3 billion.
The organisation further advocated for an additional £2.8 billion to 11.3 million lower-income households, representing a one-off cash sum of £250 per household for 2022-2023.
NIESR also criticised the Spring Statement for its failure to support regional regeneration as Covid-19 restrictions eased and society re-emerged from the pandemic, and said the disappointment in fiscal policy highlighted the need to rethink the government’s economic policy.