Households in the UK’s lowest income bracket were the only group to see their spending power fall over the past year, driven by rising energy and essential costs.
According to the latest Asda Income Tracker, compiled by the Centre for Economics and Business Research (Cebr), the gap between the best-off and worst-off households widened by £30 ($40.90) a week over the 12-month period, pushing the bottom-fifth of earners into a weekly shortfall of £71.
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Households in this bracket earn £11,000 on average and spend a disproportionately large share of that income on essentials.
The figures follow a rise in UK inflation to 2.9% in July, up from 2.6% the month before, with higher household energy bills the main contributor.
Energy inflation jumped to 4.6% from just 1.2% in June, following the latest reset of the Ofgem price cap.
Reviewed on a quarterly basis, the cap sets a ceiling on the per-unit rate suppliers can charge on standard tariffs but does not limit total bills, so actual costs still depend on how much energy a household uses.
A further reset is due in October, which is expected to add to the strain on household finances.
Cebr forecasting and thought leadership head Sam Miley said: “July was always going to be a difficult month. The Ofgem price cap was reset to reflect price changes in global energy markets, which have been massively disrupted by the conflict in the Middle East.
“Though the warmer weather may have encouraged less energy consumption, households still faced a significant increase in costs on a per unit basis. This will keep impacting consumers for the rest of Q3.”
Inflation in essential costs also picked up pace, rising to 3.6% in July from 3.1% in June—the first such acceleration since March.
The impact varied significantly by age.
Under-30s were worst affected, with essential costs swallowing 68.2% of their gross income, a burden the report attributes to steeper housing costs, weaker pay in early careers and climbing youth unemployment.
Households at the other end of the age spectrum fared considerably better: gross incomes rose 4.8% among those aged 65 to 74 and 5.0% among the over-75s, both ahead of gains recorded across every working-age bracket.
