Living standards will continue to fall, experts warn

The standard of living in the UK will continue to fall over the next three years, a report from the Institute for Fiscal Studies (IFS) suggests.

The report, which looks into the effects of the 'great recession', found that UK households were relatively insulated from the immediate effects of the recession as household incomes continued to grow slightly between 2007-2008 and 2009-2010.

However, as the UK Government attempts to reduce the deficit, household incomes in the UK look set to be squeezed 'for a considerable length of time'. Previous IFS research has shown that the decline in average living standards looks set to continue until at least 2013-14.

In the 2010/11 financial year, earnings, state benefits and tax credits all fell in real terms in the UK, which according to the IFS, is likely to have led to a median drop in net household income of 3.5 per cent - the largest annual drop since 1981.

Robert Joyce, a Research Economist at IFS and a contributor to the report, said "The current economic downturn began more than 3 years ago, and may seem like old news. But, as in other developed countries, the most severe consequences of the recession on UK living standards have only just begun to be felt, and will continue to be felt for years to come."