A new report from the Resolution Foundation think tank claims the Covid pandemic could cut average wages by £1,200 by 2025.
The report follows Chancellor Rishi Sunak’s announcement that unemployment could hit 2.6 million by the middle of next year.
The foundation’s report claimed that the effects of the virus will continue to squeeze living standards as Britain struggles to recover economically.
Chief executive Torsten Bell said: “The Covid crisis is causing immense damage to the public finances, and permanent damage to family finances too, with pay packets on track to be £1,200 a year lower than pre-pandemic expectations.”
The ‘Here Today – Gone Tomorrow’ report said: “The combined effects of weaker pay growth and higher unemployment will serve to prolong Britain’s living standards squeeze.”
Its analysis shows that average UK household economies have been growing at a slower pace than before the pandemic and are on course to grow just 10% in the 15 years since the financial crash of 2008 until 2023. Incomes had grown by 40% in the 15 years before the crisis.
The foundation says further pressure will come next April when around six million households will lose more than £1,000 because of reduced Universal Credit payments.
It also warned that much of the government’s extra spending to cope with the virus will have to be funded by increased taxation.
Said Mr Bell: “While the priority now is to support the economy, the permanent damage to the public finances mean taxes will rise in future.
But which taxes they will be, like which type of Brexit wer can expect, are questions the Chancellor left for another day.
“The pandemic is just the latest of three ‘once in a lifetime’ economic shocks the UK experienced in a little over a decade, following the financial crisis and Brexit.
The result is an unprecedented 15-year living standards squeeze.”