Disposable income has fallen for the fourth month in a row. New data shows one in five UK households can no longer afford to pay their weekly essential bills – increasing pressure on Chancellor Rachel Reeves just days before her tax-rising Budget.
The latest Asda Income Tracker, compiled by the Center for Economics and Business Research (Cebr), shows that low- and middle-income families – who make up 60% of all UK households – continue to face falling purchasing power as wage growth fails to keep up with rising taxes and property costs.
Households in the lowest income quintile, earning an average of £11,000 a year, recorded a weekly shortfall of £74 at the end of October, up 7% on the previous year. Those in the second lowest group had just £10 left after basic needs, a 17% decline on the previous year. Middle-income families (average £41,000) were left with £90 – a small fall of 1%.
In contrast, the richest 20% of households had discretionary income of £909 for the week, up 2% on the previous year, highlighting the widening gap in household resilience as inflation and tax pressures mount.
The tracker shows that basic costs increased 4.6% compared to last year, driven by food, housing and utilities – categories that account for a disproportionate share of spending by low-income families. Younger households are under the greatest pressure: those under 30 spend 69% of their gross income on essential items, largely due to rising rental costs.
The warning comes as unemployment reaches 5%, labor market conditions deteriorate and Reeves prepares to deliver a budget expected to include further fiscal tightening to plug a £20 billion deficit.
Sam Miley, head of forecasting at Cebr, said the outlook remained fragile despite easing inflation.
“Worse-than-expected labor market numbers for September show weaker demand and rising employment costs,” he said. “The prospects for the UK economy are not improved by the high likelihood of budget cuts in the November Budget.”
Monthly disposable income fell again in October, falling by £1.01 compared to September, with average household purchasing power now standing at £253 a week – the same level as last December.
Gross household income rose 3.6%, slightly slower than the previous month. Those aged 30 to 49 recorded the highest average income at £1,384 a week, followed by those aged 50 to 64 at £1,264.
Economists warn that low earners will face further problems over the Christmas period as the cost of living remains high, while tax rises in Wednesday’s budget risk increasing pressure on already vulnerable households.
