Living standards outlook for second half of 2020s is bleak, says think tank

Independent

26-06-2025

UK households face a 'bleak' living standards outlook for the remainder of the 2020s, with the tough start to the decade also contributing to the risk that some could end up no better off by 2030 than they were a decade earlier, according to a think tank.
The Resolution Foundation said that the 'bust, boom and bleak outlook' seen this decade could leave the 2020s 'as the first decade of the modern era to witness no improvement in disposable incomes across Britain'.
In its 'central scenario', the typical annual real income of non-pensioners is set to grow 'only slightly' over the five years after 2024-25, by 1% overall, or a cash increase of around £300 in total.
Its report said: 'Our outlook for 2025-26 specifically remains poor with income flat (0% growth).'
The Living Standards Outlook 2025, funded by Nationwide Building Society, said that frozen tax thresholds and rising council tax are 'cancelling out real pre-tax earnings growth for many, even before accounting for water, rent and mortgage rises'.
The report continued: 'Taking into account the cost-of-living crisis, the typical income in 2029-30 would remain essentially unchanged (0% growth) compared to 2019-20.
'This would clearly make the 2020s the worst decade out of the past six for living standards growth.'
The outlook for the lower-income half of the non-pensioner population is worse in the years ahead, according to the projection.
The foundation said the average real incomes of this group could be 1% (£200) lower in 2029-30 than in 2024-25.
Within the weak outlook overall, some parts of the population are expected to fare better, the report said.
The typical pensioner income is projected to rise by 5% between 2024-25 and 2029-30, with a £1,500 increase.
Housing tenure also plays a key role in determining the outlook, according to the research, with mortgage holders set to see income falls as they come off fixed-rate deals, while outright homeowners are expected to see a boost to their living standards.
The projection for weak income growth over the second half of the decade follows a 'rollercoaster' first half, in which living standards were rocked by Covid-19 and the cost-of-living crisis, according to the foundation, which is focused on improving living standards for households on low to middle incomes.
It said there was a 'mini living standards boom' as incomes grew by 4% (£1,300) in 2024-25.
The foundation also said that the economic outlook could improve, with policies potentially offering a 'helping hand' to lift living standards for poorer households.
Adam Corlett, principal economist at the Resolution Foundation said: 'The living standards story of the decade so far has been bust and boom, with Covid-19 and a cost-of-living crisis followed by a much-needed recovery last year. But the rest of the decade looks bleak, with typical household incomes set to grow by just 1% over the next five years.
'There are winners and losers within this weak outlook, with pensioner incomes set to grow by a healthy 5% over the rest of the decade, while the poorest half of the population are set to see their incomes fall.
'But a stronger economy and the right policy interventions can brighten this outlook. Maintaining strong wage growth and returning to pre-pandemic employment levels would make middle-income Britain far better off, while ending the two-child limit can lift living standards for poorer families.'
A Treasury spokesperson said: 'We know that many are still struggling with the cost of living which is why we were clear on the need to put more money in the pockets of working people in our Plan for Change.
'Since July, real wages have grown more than in the entire first decade of the last government, our commitment to economic stability has helped interest rates to fall four times, we have protected working people's payslips from higher taxes, froze fuel duty, increased the national living and minimum wage and in the latest data, real household disposable income per person is growing at its fastest pace in two years.'