The UK's austerity program is hitting home, and coupled with soaring inflation is slamming the country's workforce. Disposable income has now fallen the most since 1921, excluding war time, according to Center for Economics and Business Research (via The Telegraph).
New Cebr forecasts show that 2011 is likely to show a fall in real household disposable incomes of 2.0%. Taken in conjunction with the 0.8% fall now recorded as having taken place in 2010, the new estimates show that the UK is now seeing a bigger fall in real household disposable incomes than in the 1930s and the biggest fall excluding WW2 and the General Strike since 19211.
This means that households will have £27.3 billion less spending power in 2011 than in 2009 – a fall of £910 per household.
And while the government's budget office believes this decline in income will be made up by more consumer debt, Douglas McWilliams, the CEO of CEBR, doesn't agree. "The OBR now forecasts that squeezed incomes will be offset by a record increase in indebtedness: it is surprising that after a debt fuelled consumer boom and housing bubble that they think either that borrowers will be prepared to borrow that amount or that lenders will be in a position to lend that amount, let alone both," he wrote.
While everyone may be crying for budget cuts and further austerity in the U.S., the evidence is piling up in the UK that it could lead to stagflation.
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