The average British household lost £11,000 as a result of the most brutal recession for more than a generation, official figures revealed yesterday.
The figures, in a report from the Office for National Statistics, showed household wealth hit a high of £128,000 in 2007 but stood at £117,000 at the end of 2009, largely as a result of falling house prices.
Gross domestic product per person plunged by 5.5 per cent between 2008 and 2009 – the largest annual percentage fall in any year since 1949, and a stark illustration of the scale of the contraction in the UK.
The downturn, triggered by an international banking crisis which, according to some estimates, led the Government to spend as much as £1 trillion propping up the sector, lasted for six quarters and did not end until late last year.
It cut 6 per cent from Britain's economy and resulted in the loss of 600,000 jobs, making it the deepest downturn since records began in the early 1950s. Net wealth actually rose 7.3 per cent in 2009 compared with the low point hit in 2008, although the recent string of negative data about the housing market suggests that it could easily start to fall again.
The report said that at its nadir in 2008, real household wealth in the United Kingdom had fallen to its lowest level since 2003, "reflecting the effects of the recession".
Despite the fall in wealth and GDP during the downturn, household income in 2009 increased by 1.2 per cent – as it has since the 1980s regardless of whether the economy was growing or in recession.
The Office for National Statistics (ONS) said this was largely a result of the historically low levels of interest rates. Although the Bank of England's Monetary Policy Committee is not expected to raise rates imminently, signs of division have emerged among its members.
Andrew Sentance has been arguing for an increase while others have called for more "quantitative easing", colloquially likened to printing money; they say this is the best way to further stimulate an economy which is likely to be shaken by the forthcoming spending cuts, which some fear could cost 500,000 jobs and send Britain into a second downturn.
Total household debt as a percentage of disposable household income fell to 161 per cent in 2009 from 169 per cent a year earlier, according the figures from the ONS.