Your average salary could be cut by £1,200 over the next five years - this is why

Thursday, 26th November 2020, 2:54 pm
Updated Thursday, 26th November 2020, 2:54 pm

Pay packets are expected to suffer cuts of up to £1,200 per year by 2025 due to the coronavirus pandemic, according to a think tank.

The Resolution Foundation, a think tank focused on improving living standards for people on low to middle incomes, has predicted that the Covid crisis will lead to an economic decline.

Falling wages

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The economic fallout from the ongoing pandemic could see salaries slashed by an average of £1,200 per year over the next five years.

The prediction comes following a warning from Chancellor Rishi Sunak that unemployment in the UK could surge to 2.6 million by mid-2021.

The research, titled Here Today, Gone Tomorrow, said that "the combined effects of weaker pay growth and higher unemployment will serve to prolong Britain's living standards squeeze".

Analysis has showed that household incomes in the UK had been growing at a slower pace even prior to the pandemic and was on course to grow just 10 per cent during the 15 years between the financial crash in 2008 and 2023.

By contrast, household incomes grew by 40 per cent in the 15 years leading up to the financial crisis.The Spending Review by Chancellor Rishi Sunak has pledged £280bn to help the country through the economic downturn caused by the pandemic.

Losses of more than £1,500

The research also predicted that further pressure would be added come April 2021 if Universal Credit cuts go ahead, with about six million households expected to lose more than £1,000.

It further warned that the "economic emergency" must be dealt with through tax rises.

Torsten Bell, chief executive of the Resolution Foundation, said: "While the priority now is to support the economy, the permanent damage to the public finances mean taxes will rise in future.

"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."