Higher living expenses to cost workers an extra £800
10 March 2008 / by Joy Tibbs
While workers in the UK will be £44 better off on average after this year's pay rises, millions are struggling to survive as the cost of living soars. According to uSwitch, households will be £21 billion worse off.
Director of consumer policy, Ann Robinson, says: "This is crunch time for UK households as we face up to a downturn in the economy, the news of below-inflation pay rises and the reality of having less money in our pockets.
"Hikes in taxes, the cost of food, utility bills and social contributions over the last decade have outpaced the overall rise in income levels, to push disposable incomes in the UK to their lowest level in a over a decade."
Its research found that private sector workers will earn £61 more on average each month, with wages up 4.2 per cent, or £1,089 gross per year, while public sector workers will see earnings rise just £31, up just 2.5 per cent, or £558 gross.
Meanwhile, 9 million, or 35 per cent, will not receive a pay rise at all, and 13 million (48 per cent) will be given a salary increase below the Retail Price Index of 4.2 per cent. Furthermore, 5.4 million, or 20 per cent, will see wages rise below the Consumer Price Index of 2.2 per cent.
Although wages will rise by 3.4 per cent overall on average, living costs are up an incredible nine per cent, leaving a substantial deficit. The study found that millions of families are facing a monthly rise of £148 in essential living costs.
USwitch found that bills have risen by £1,783 a year, with petrol prices up 18 per cent (£192), energy bills up 13 per cent (£114), food prices up 11 per cent (£324) and mortgage prices up nine per cent (£1,020).
"This is a bleak time for consumers who are concerned about their jobs, their homes and their ongoing ability to manage their debts. Not only are the days of easy credit numbered, but we are also feeling the strain of food and petrol prices rising at their fastest rate since records began," says Ms Robinson.
"The UK faces the double threat of turmoil in the financial markets and increasing inflation. When coupled with lower than anticipated salary increases it can only mean that consumers are in for a bumpy ride," she adds.
Police, nurses and civil servants, will be worst affected, with pay rises of just 2.05 per cent, 2.09 per cent and 2.13 per cent, respectively. However, chief executives will see wages rise 8.2 per cent, financial advisors will get a seven per cent rise and lawyers will be six per cent better off. The UK's 11 million pensioners will receive a mere four per cent rise in the state pension, affording the just £16 more a month to cover rising costs.
"Consumers can help themselves by taking a long hard look at their own household budgets to see where they can cut costs," advises Ms Robinson. "There are positive signs that consumers are already cutting back, curtailing spending and trying to clear outstanding debt. With a careful eye and a steady hand on the household budget, most should be able to weather the storm."
© Fair Investment Company Ltd