A think tank has issued a warning that the ongoing conflict in the Middle East could hinder the growth of living standards for lower-income families in the UK.
A recent analysis by the Resolution Foundation of the Spring Statement revealed that while the nation is expected to see an improvement in living standards this year, the potential impact of Middle East turmoil may lead to a surge in energy prices.
Despite no new policies being announced by Chancellor Rachel Reeves, she emphasized the importance of her fiscal plan in a globally uncertain environment, with the Iran conflict posing a risk to economic stability. The Office for Budget Responsibility adjusted its GDP forecasts, expecting a 1.1% increase in 2026, down from the previous 1.4%, but raised projections for 2027 and 2028 from 1.5% to 1.6%.
The Resolution Foundation anticipates a growth of 0.9% (£300) in living standards for typical working-age families in the upcoming year (between 2025-26 and 2026-27). Lower-income households are set to experience a more substantial increase of 3.9% (£800), marking one of the strongest years for living standards improvement for poorer families in the last two decades. This positive trend follows recent policy changes, including the removal of the two-child limit and the introduction of a permanent above-inflation rise in Universal Credit.
However, the Foundation cautions that this boost may be short-lived, projecting a decline of 0.5% (£150) in incomes for typical working-age families in the remaining two years of the Parliament (2026-27 to 2028-29). They also highlight the potential impact of sustained increases in oil and gas prices, which could contribute to a 1% rise in inflation and add £500 to average annual energy bills.
Ruth Curtice, Chief Executive at the Resolution Foundation, expressed concerns about the uncertain economic outlook and emphasized the need for policymakers to navigate short-term uncertainties while promoting productivity-driven economic growth to enhance living standards across the country.
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