Real incomes for poorest families will not return to pre-COVID level ‘until end of 2026’
The poorest half of UK families will have to wait until the end of 2026 for their real incomes to return to pre-COVID levels, according to independent analysis.
The National Institute of Economic and Social Research (NIESR) said low to middle income households face seven years of falling living standards due to the fallout from the pandemic and, latterly, the continuing cost of living crisis.
Lockdowns and restrictions on earnings, followed by price hikes and Bank of England interest rate hikes since December 2021 to help tame inflation, have meant wages have mostly struggled to keep pace with price growth and rising borrowing costs alike.
The rate of Inflation peaked last year above 11% but it currently stands at 6.7%.
The annual pace of price increases is forecast to have fallen dramatically last month.
That is mostly due to the worst impact to energy bills from Russia’s invasion of Ukraine, falling out of the calculations.
Nevertheless, the NIESR said that real incomes, which take account of inflation, in the bottom half of the income distribution, will be around 5% lower in the 2023/24 financial year compared with the year ending March 2020.
That is despite average wage rises of around 7% in the current year, a figure that is expected to remain around the same level next year.
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‘Most households are just one pay cheque away from being homeless’
Professor Adrian Pabst, deputy director for policy at the NIESR, said: “Higher real wages this year are a welcome boost, especially for low-income working families who have been hit hardest by the COVID and inflation shocks.
“But a return to pre-pandemic living standards will require sustained real wage growth, including further increases in the National Living Wage.”
The NIESR’s latest quarterly forecast report said that if living standards were to rise, and help boost the country’s “anaemic” economic growth, public investment must be the focus of the looming autumn statement.
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The ‘fiscal bind’ facing Jeremy Hunt
Chancellor Jeremy Hunt has ruled out pre-election tax giveaways and also signalled a focus on bringing down debt.
A lack of new spending or tax cuts, while tough for many Tory MPs who are worried about their seats, will aid the government’s target to halve inflation this year.
The NIESR believed that the Bank of England would not have to impose further interest rate hikes beyond the 14 consecutive increases already seen, given that inflation was expected to continue to ease sharply.
Its report warned that while rising borrowing costs, which have exacerbated the shocks to household bills, may have peaked, there was no prospect of Bank rate returning to its COVID-era level of 0.1%.
It saw the interest rate settling at levels closer to 3-3.5%, with the first declines expected later next year.
An influential committee of MPs is seeking COVID-19-style financial support for Jaguar Land Rover as it tries to recover from a cyberattack.
After a week of plant closures, the Committee for Business and Trade has written to the chancellor, asking her what is being offered to the carmaker “to mitigate the risk of significant, long-term commercial damage to affected firms”.
The 34,000 UK workers of Jaguar Land Rover (JLR) are to remain at home until at least next week after a cyberattack discovered last week halted operations.
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Staff are still being paid from JLR sites in Halewood, Merseyside, and Solihull and Wolverhampton in the West Midlands, but the entire economy around the West Midlands is affected.
JLR suppliers Evtec, WHS Plastics, SurTec and OPmobility have had to temporarily lay off roughly 6,000 staff.
Operations could be disrupted for “most of September” or worse, according to a report from The Sunday Times.
On Thursday, Business and Trade Committee chair Liam Byrne wrote to Chancellor Rachel Reeves, saying: “Firms across the supply chain are now warning the committee of disruption to both upstream and downstream businesses.
“This disruption, we are told, may imminently pose very significant risks to cashflow.”
Intervention, akin to the emergency steps taken to secure British Steel production, is suggested by Mr Byrne to “protect sovereign areas of strength in the UK’s industrial, scientific and technological base”.
A group of English-speaking hackers claimed responsibility for the JLR attack via a Telegram platform called Scattered Lapsus$ Hunters, an amalgamation of the names of hacking groups Scattered Spider, Lapsus$ and ShinyHunters.
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Four arrested over M&S, Co-Op and Harrods cyber attacks
Scattered Spider, a loose group of relatively young hackers, were behind the Co-Op, Harrods and M&S attacks.
Four people were arrested for their suspected involvement in the April attacks and have been bailed.
The Marks & Spencer (M&S) executive responsible for its technology function is leaving the retailer months after a devastating cyber attack which disrupted its systems at a cost of hundreds of millions of pounds.
Sky News has learnt that Rachel Higham, M&S‘s chief digital and technology officer, is leaving the company.
A former WPP and BT Group executive, Ms Higham was hired by M&S early last year.
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Her departure was announced in an internal memo circulated on Thursday.
In it, the company said she was “stepping back from her role”.
“Rachel has been a steady hand and calm head at an extraordinary time for the business, and we wish her well for the future”.
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July: Four arrested over cyber attacks
The April cyber attack on M&S, which was conducted by a group called Scattered Spider, brought its online operations to a halt, underlining the growing threat posed by such incidents.
Its click-and-collect service is now back up and running, and the retailer expects part of its costs to be covered by insurance.
M&S said early last month that it was not looking to replace Ms Higham following an enquiry from Sky News.
It was unclear who would succeed her in the role or whether she would be eligible for a payoff.
An M&S spokeswoman confirmed on Thursday that the memo was genuine but refused to comment further.
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