Outlook for UK Households, the Devolved Nations and the English Regions

The aggregate shocks to the UK economy have widened disparities of income and wealth across the household distribution and between prosperous and poor parts of the country: falling real wages and rising bills and debt levels have hit households in the bottom half of the income distribution hardest, leading to a shortfall in their real disposable incomes by up to 17 per cent over the period 2019-2024. We project that real wages in many UK regions will not return to pre-pandemic levels by the end of 2024: the East of England, parts of the South East and the West Midlands will be below pre-Covid levels, with median real wages in the West Midlands around 5 per cent lower than in 2019. By the fourth quarter of 2024, we project that median real wages in London will be more than twice as high as UK real median wages, with wages in Wales, the North East and the West Midlands projected to remain about 20 per cent below the UK median. The distributional impact of the cost-of-living crisis is shifting from energy prices to food prices and in particular housing costs, with fast-rising monthly mortgage repayments and rents increasing by 5.1 per cent over the past year. Around 1.2 million households (4 per cent) will run out of savings in 2023-24 as a result of higher mortgage repayments: this will take the total number of households without savings to around 7.8 million (28 per cent). Monthly repayments on fixed-rate mortgages that are refinanced will on average rise from around £700 to £1,000 and monthly repayments for variable-rate mortgages will on average rise from around £450 to £700: this will affect around 3m households on variable-rate mortgages. Around 1.6 million low-income households with disposable incomes of less than £24,000 per year hold high-cost loans; they spend on average £3,200 per year (£267 per month) to pay back the debt and service interest: for poorer households, coping with low or no real wage growth and persistent inflation has involved new debt to pay for higher housing, energy and food costs. Despite a robust UK labour market, unemployment and inactivity are rising in Wales: only Scotland and London are above pre-pandemic levels of employment; unemployment is falling in Northern Ireland, the North East and Yorkshire and the Humber, but inactivity is higher almost everywhere (except Northern Ireland, Scotland and Yorkshire where it is high and stable).