Households to face biggest fall in living standards as consumer confidence tumbles

Britons may suffer the biggest annual decline in their living standards since the 1950s as Russia-Ukraine conflict threatens to push up global food and energy prices, stated reports today (26) citing financial experts.

Analysts have warned the conflict in Ukraine could drive up the inflation rate further still, possibly to more than 8 percent this year. Inflation is already at the highest level since 1992, having reached 5.5 per cent last month as the world economy grapples with the fallout from Covid-19. It was forecasted to touch 6 percent by spring.

With growth of workers’ pay, benefits and other sources of income failing to keep pace, real household income fall by 3.1 percent this year, “comfortably the largest calendar year fall since at least 1956”, The Guardian reported an expert as saying.

The conflict is expected to drive both food and fuel prices globally. This week’s increases have already been passed on to petrol and diesel prices at filling stations across Britain. The RAC said prices rose to new record highs for the fourth time this week, with unleaded at almost 150p per litre and the price of diesel above 153p for the first time ever.

Meanwhile, a recent GfK report stated that consumer confidence in the country fell in February to its lowest level in more than a year as Britons’ expectations for the next 12 months deteriorated sharply on the back of broadening price pressures.

The consumer-confidence barometer compiled by research firm GfK dropped to minus 26 in February from minus 19 the previous month, the lowest level since January 2021. The indicator is well below economists’ expectations, who had forecast a slight decline to minus 20.

Consumer confidence in the U.K. has declined for three consecutive months. 

“Fear about the impact of price rises from food to fuel and utilities, increased taxation and interest rate hikes has created a perfect storm of worries that has shaken consumer confidence,” GfK’s Client Strategy Director Joe Staton said. 

“Slowing consumer spend slows the wheels of the U.K. economy so this is unwelcome news,” he said.