UK household incomes may return to 2004 levels: Study

According to a leading economic think tank, households in the UK may be hit with the biggest fall in income for 30 years.

The Institute for Fiscal Studies said average income could fall 3 per cent this year, the sharpest fall since 1981 which would take household incomes back to the 200-05 levels.

It said average take-home incomes were up during recent recession on account of low inflation and higher social benefits.

However, IFS analysis says incomes would be squeezed as the long-term effects of the recession and higher inflation. 

Lower wage increases and the corrosive effect of rising inflation mean that it was "entirely possible" for incomes this financial year (2010-11) to  return to levels of six years ago, the policy group said.

According to IFS research economist Wenchao Jin, "The figures tell a story of pain delayed, but not pain avoided."