By Vivienne Russell | 12 September 2011
The impact of the recession on UK households will continue to be felt for years to come, economists have warned.
An Institute for Fiscal Studies report says the ‘Great Recession’ has led to some of the biggest changes in living standards and employment levels in developed countries since at least the Second World War.The UK’s experience is somewhere in the middle, with other countries suffering sharper falls in output and in the employment rate, the report says. UK households were relatively well insulated from the immediate impact of the recession, thanks largely to the stabilising effect of the welfare system. Increases in financial state support had been ‘unusually generous’ in the UK, the IFS says.
But the future looks much more gloomy, with household incomes set to feel the pinch, it predicts. In the most recent financial year (2010/11), earnings, state benefits and tax credits all fell in real terms. The IFS estimates that this is likely to have translated to a 3.5% fall in median net income, the largest single-year drop since 1981.
‘It thus seems that much of the impact of the Great Recession on UK living standards was not felt until after the economy had stopped contracting, but that the pain was most definitely delayed rather than avoided,’ the report says.
IFS research economist Robert Joyce said: ‘The current economic downturn began more than three years ago, and may seem like old news. But, as in other developed countries, the most severe consequences of the recession on UK living standards have only just begun to be felt, and will continue to be felt for years to come.’
