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According to a new analysis, the real incomes of the poorest part of UK families will return to pre-pandemic levels by the end of 2026.
The National Institute of Economic and Social Research (NIESR) estimates that interest rates have peaked and wages will rise to just over 7% in 2023 and 2024.
He called on the government to increase public investment and implement tax cuts ahead of this month’s autumn declaration.
“Without it, the UK will be stagnant for a decade and with little prospect of regional regeneration,” he said.
NIESR said the genuine source of income for families at the back of the income distribution source will be a decline of about 5% in fiscal year 2024 compared to the year ending March 2020.
This means that real household incomes, which take inflation into account, will not return to pre-pandemic levels until 2026, despite steep wage increases.
“Higher real wages this year are a welcome boost for low-income families who have been hit hardest by Covid and inflationary shocks,” said Professor Adrian Pabst, from NIESR.
“But returning to pre-pandemic living standards will require a sustained expansion of genuine wages, adding additional increases in the national living wage. “
The organization said the government is creating investment incentives for businesses.
This can occur simply by making permanent a recent resolution that allows corporations to fully spend their investment.
NIESR predicts that interest rates will not exceed the current base rate of 5. 25% and will stabilize between 3% and 3. 5%.
According to the report, those higher fees, along with falling real wages, helped drive down space costs for the first time in just 15 years.
It forecasts that prices will fall by approximately 6. 5% during the second quarter of 2025, putting an additional 50,000 households in a situation of negative capital.
Professor Pabst added: “Only an economic and social policy review can avoid another era of protracted stagnation in which the UK falls more than other complex economies and regional disparities continue to widen. “