UK households face a 0.6 per cent drop in income over the coming financial year as energy prices surge, according to the Resolution Foundation. The think-tank's analysis shows the median working-age household will be £480 worse off, reversing previous expectations of 0.9 per cent income growth. This reversal comes despite the recent ceasefire in Iran, with James Smith noting that 'damage to household finances this year is to a large degree already done.'

Lower-income households will see some growth from benefit increases, but inflation will erode these gains by more than a percentage point. Middle and higher-income households face negative growth after previously expecting modest gains. Chancellor Rachel Reeves has ruled out universal energy subsidies, citing strained public finances after the £70bn support package following Russia's invasion of Ukraine.

The economic pressure compounds existing challenges including rising taxes, slowing wage growth, and a weakening jobs market. The Office for Budget Responsibility expects household disposable income to rise just 0.5 per cent annually for the rest of the decade. With fixed-rate mortgages ending and rate cut hopes fading, homeowners face higher borrowing costs. Recruitment data shows ongoing hiring slowdowns, particularly in hospitality, retail, and care sectors, while NHS trusts plan to cut at least 21,000 roles across England.