Disposable income in the UK has decreased for the fourth consecutive month, with recent data indicating that one in five households can no longer meet their weekly essential expenses. This development adds pressure on Chancellor Rachel Reeves just days before the anticipated tax-raising Budget.
The latest Asda Income Tracker, produced by the Centre for Economics and Business Research (Cebr), reveals that low- and middle-income families, comprising 60% of UK households, continue to experience diminishing spending power. This is due to wage growth failing to keep up with rising taxes and essential costs.
Households in the lowest income quintile, earning an average of £11,000 annually, faced a £74 weekly shortfall in October, a 7% decline from the previous year. Those in the second-lowest bracket had only £10 remaining after covering essentials, a 17% deterioration year on year. Middle-income families, with an average income of £41,000, were left with £90, marking a slight 1% decrease.
In contrast, the wealthiest 20% of households ended the week with £909 in discretionary income, a 2% increase from last year. This highlights the growing disparity in household resilience amid mounting inflation and tax pressures.
The tracker indicates that essential costs rose by 4.6% year on year, driven by increases in food, housing, and utilities—categories that disproportionately affect lower-income families. Younger households face the most significant strain, with those under 30 spending 69% of their gross income on essential items, primarily due to escalating rental costs.
This warning coincides with unemployment reaching 5%, weakening labour market conditions, and the impending Budget announcement, which is expected to include further fiscal tightening to address a £20 billion shortfall.
Sam Miley, head of forecasting at Cebr, commented on the fragile outlook despite easing inflation. “Worse-than-expected labour market figures for September show weakened demand and rising employment costs,” he stated. “Prospects for the UK economy are not helped by the high likelihood of fiscal contraction in the November Budget.”
Monthly disposable income decreased again in October, falling by £1.01 from September, with average household purchasing power now at £253 per week—the same level recorded last December.
Gross household income grew by 3.6%, slightly slower than the previous month. Those aged 30–49 recorded the highest average income at £1,384 per week, followed by those aged 50–64 at £1,264.
Economists caution that lower earners are likely to face additional challenges over the Christmas period as living costs remain high, while any tax increases in Wednesday’s Budget could exacerbate pressures on already vulnerable households.
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