Fuel hikes blamed for third year of falling real incomes

British housesholds are more than £2,000 a year worse off than they were in 2007 and face a third successive year of falling disposable incomes as soaring oil prices crush household budgets, the Centre for Economics and Business Research has warned.

The forecaster previously thought that real-terms incomes would rise in 2012 after two years of declines, due to an easing inflation outlook. But because of the oil price spike, causing record petrol prices, it now predicts a marginal 0.1 per cent slide in disposable incomes this year and inflation still well above the Bank's 2 per cent target at 2.5 per cent if crude remains close to its current peak.

The CEBR added that real disposable income per household in the UK is set to be 5.7 per cent lower than in 2007 – the equivalent to incomes being cut by £2,210 over the six-year period.

Doug McWilliams, chief executive, said: "It looks like quantitative easing is starting to affect GDP growth around the world, and the international economy looks to be temporarily in much better shape than it appeared to be at the turn of the year. But every silver lining has a cloud – in this case the higher energy and commodity prices which are resulting from the combination of uncertainties in the Middle East and QE in Europe and the US, which mean both higher inflation and squeezed real disposable incomes."

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