British families to have £910 less to spend this year: CEBR report

According to The Centre for Economics and Business Research (CEBR), UK, the soaring inflation coupled with low pay rises means that household peacetime disposable incomes are at their lowest since 1921.

CEBR added with the rising food, clothing and energy costs the average British family would be left with £910 less to spend this year than in 2009.

According to the CEBR's calculations, household disposable income will fall 2 per cent this year, more than double last year's fall of 0.8 per cent and the biggest drop since the savage 1919 to 1921 post-First World War recession.

The CEBR forecasts inflation would average 3.9 per cent in 2011, at the highest since 1992, as January's increase in VAT from 17.5pc to 20pc and the rising cost of oil and other commodities continue to drive up prices.

At the same time, salaries will rise just 1.9pc as unemployment remains high and the public sector makes cut-backs.

"The virtually unprecedented peacetime squeeze on real household incomes, combined with more realistic forecasts for exports and investment growth means that GDP growth will be subdued for the next two or three years,"  said Douglas Williams, chief executive of the CEBR

Meanwhile, the CEBR estimates that pay packets would rise only 1.9 per cent as unemployment remained high and the full impact of public sector cuts set in.

The report says that the lower spending power means the economy will only grow by 1% in 2011 and will be "subdued" for the next two or three years.