UK’s bleak living standards forecast: Stagnating growth, rising poverty

Britain is on track to experience its worst decade for living standards growth in more than 6 decades, according to the Resolution Foundation’s Living Standards Outlook 2025, released on June 26. Despite a sharp income recovery in 2024-25, the report warns that median household incomes will stagnate through the rest of the 2020s, particularly hitting lower-income families, renters, and children. Drawing on economic forecasts from the Office for Budget Responsibility (OBR) and the Bank of England, the report projects that typical non-pensioner household incomes will grow by just 1 per cent in real terms between 2024-25 and 2029-30, a cash gain of only around £300. This would amount to zero growth across the full decade, following a turbulent first half marked by the Covid-19 pandemic and the cost-of-living crisis.

The weakest outlook is for those at the bottom of the income distribution. The poorest 10 per cent of non-pensioner households are projected to be 8 per cent worse off in 2029-30 compared to 2019-20, a loss of around £1,000. Meanwhile, incomes for the bottom half overall are expected to fall by 2 per cent over the decade, whereas the top half could see a slight rise of 1 per cent.

Pensioners and outright homeowners are among the few groups likely to see positive growth. Pensioner incomes are projected to rise by 5 per cent between 2024-25 and 2029-30, largely due to the continuation of the triple lock on the state pension. By contrast, private renters are expected to see incomes fall by 2 per cent and mortgagors by 1 per cent over the same period. Children, in particular, are expected to suffer, with their typical household income projected to be 2 per cent lower in 2029-30 than in 2019-20.

Policy choices and economic risks ahead

The report warns that current government policies, including the continuation of the two-child benefit limit, frozen income tax thresholds, and rising council tax, are set to suppress income growth. Under existing policies, child poverty is expected to rise from 31 per cent in 2023-24 to 34 per cent by the end of the decade, representing a record 4.8 million children in poverty.

However, the Resolution Foundation highlights that alternative policy decisions could significantly alter the trajectory. For instance, scrapping the two-child limit could reverse the expected rise in child poverty and deliver modest income growth for the poorest families, even if funded by tax increases.

More optimistic economic scenarios, including stronger pay growth and higher employment, could also improve outcomes. In such a case, median incomes could rise by up to 3 per cent between 2024-25 and 2029-30, still historically weak, but better than the central forecast.

Public concern reflects hard realities

The bleak projections come amid widespread public anxiety. According to recent surveys cited in the report, 86 per cent of Britons view the cost of living as the UK’s most pressing issue, with a record 26 per cent saying they are struggling to live on their income, up from 16 per cent in 2018.

Despite strong earnings growth in recent years, rising inflation, high housing costs, and policy headwinds have eroded real income gains. Without substantial changes, the 2020s could mark a generational low point for British household living standards.

“The government’s goal of raising living standards is welcome but unambitious,” said Adam Corlett, lead author of the report. “Delivering noticeable income growth for a broad range of voters will require targeted measures for the poorest as well as sustained economic growth.”