A think tank has raised concerns that the ongoing conflict in the Middle East could impact the growth of living standards for lower-income families in the UK.
Recent analysis by the Resolution Foundation of the Spring Statement indicates that the nation is expected to see an improvement in living standards this year. However, the potential effects of the Middle East conflict may lead to a surge in energy prices.
Despite not introducing new policies, Chancellor Rachel Reeves emphasized the importance of her fiscal plan in the current uncertain global landscape, with the Iran conflict posing a threat to economic stability. The Office for Budget Responsibility revised its GDP forecasts, anticipating a 1.1% increase in 2026, lower than the previous estimate, but raising projections for 2027 and 2028.
The Resolution Foundation predicts a 0.9% growth in living standards for typical working-age families and a significant 3.9% growth for lower-income households in the upcoming year. This positive outlook follows recent policy changes that benefit poorer families, such as the removal of the two-child limit and an above-inflation increase in Universal Credit.
However, the Foundation warns that this growth could be short-lived, with a projected decline in incomes for typical working-age families in the remaining years of the Parliament. They also caution that sustained increases in oil and gas prices could lead to higher inflation and energy bills.
Ruth Curtice, Chief Executive at the Resolution Foundation, highlighted the current economic uncertainty and the imbalanced living standards forecast for the Parliament. While the upcoming year looks promising for living standards, there are concerns about a potential energy price shock affecting this positive trend.
Curtice emphasized the need for policymakers to address short-term uncertainties and promote productivity-driven economic growth to sustain and improve living standards across the country.
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