A fresh surge in energy prices is expected to hit household finances hard this year—wiping out income growth and pushing many families into a real-terms decline.
According to the Resolution Foundation, the median working-age household in Britain could be around £480 worse off over the course of the year, as higher energy costs linked to the conflict in the Middle East feed through into everyday spending.
The think tank’s analysis, based on market forecasts following the announcement of a ceasefire, suggests the impact will be felt across the income spectrum—but not evenly.
For many households, what had looked like modest progress is now reversing. A typical family that was previously on track for income growth of 0.9% is now expected to see a fall of 0.6%—a swing equivalent to £480 over the financial year.
Middle- and higher-income households are likely to feel the shift most sharply. Even small expected gains have now tipped into negative territory as rising energy costs erode purchasing power.
Lower-income households may fare slightly better, but only marginally. While increases in benefit levels are expected to provide some support, the Resolution Foundation estimates that inflation will cut those gains significantly. Income growth for the poorest fifth of households is now forecast at just 1.2%, down from 2.8% before the latest escalation.
The broader picture is one of a renewed squeeze on living standards. Despite hopes that tensions in the Middle East may ease, energy prices remain well above pre-conflict levels—keeping pressure on household budgets.
As James Smith, Chief Economist at the Resolution Foundation, notes, the effects are likely to be widespread. While the scale of the impact may vary, the direction is consistent: rising costs are reducing what households can afford, leaving many worse off than they had expected just months ago.
