Middle East conflict energy prices set to leave typical British household £480 worse off this year
The typical British household is set to be £480 worse off this year than it would have been without the conflict in the Middle East, according to new analysis by the Resolution Foundation.
The independent think tank published the estimate on Monday, saying that rising energy prices linked to the conflict have pushed down income growth across the distribution.
Income growth for the poorest fifth of households is now estimated at 1.2 per cent for the current financial year.
Before the conflict, the Foundation had put that figure at 2.8 per cent.
For households around the middle of the income distribution, the picture is sharper.
The typical working-age household, previously expected to see income grow by 0.9 per cent, is now set to see its income fall by 0.6 per cent over the course of the year.
There is one partial exception among lower-income families.
Households in the bottom half of the income distribution with three or more children are estimated to see income grow by 7.7 per cent this year, largely because of the abolition of the two-child limit on benefit claims.
Poorer families with fewer than three children are not expected to see any income growth at all.
The Foundation said higher energy costs and petrol prices are expected to be passed on to households directly.
Deeside.com tracks fuel prices at petrol stations across Flintshire at deeside.com updated every two hours.
The Foundation called on the government to bring forward work on a social tariff, a discounted energy rate for low-income and vulnerable households, ahead of winter when costs are expected to hit hardest.
The analysis is based on market pricing consistent with forecasts at the time of a ceasefire announcement in the Middle East.
The Foundation said the conflict’s future course remains uncertain and that energy prices remain above pre-war levels.
James Smith, Chief Economist at the Resolution Foundation, said: “Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels, meaning many households face a decline in their purchasing power this year.
“This squeeze will run right through the income distribution.
“Lower-income households will still see some income growth thanks to a long-awaited rise in real benefit levels, but inflation will likely knock more than a percentage point off what they stood to gain.
“For those in the middle and towards the top of the income distribution, even the thin growth they had been expecting has tipped into negative territory.”
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