The latest report from a leading group of economists has forecast that consumer spending in the U.K. will remain subdued for the better part of the next decade on falling disposable incomes, according to The Daily Telegraph. On Monday, the Ernst & Young Item Club reported that real household disposable incomes will continue the decline seen in 2010, moving down by 0.1% after dropping 0.8% last year. That outcome would mark the first consecutive declines since 1976-7. The group said that weak earnings growth and high inflation would put household finances under “severe pressure.”
The Item Club expects that spending will remain below the pre-recession peak levels until at least 2013, although the group warned that consumer spending could remain subdued for a further seven years. Spending is expected to increase by an average of 2% annually until 2020, which is far below the 3.3% average in the decade before the financial crisis. Senior Item Club economic adviser Andrew Goodwin said, “The squeeze on household budgets is only going to intensify this year,” and added that risks are “skewed to the downside.”