UK living standards fall despite fastest growth in G7, highlighting Burnham’s economic challenge – business live

GDP quarterly national accounts show people grew worse off in January to March 2026, and saved less too High inflation means UK living standards are only likely to rise slightly through 2026, after falling in January-March, predicts Rob Wood, chief UK economist at Pantheon. Wood told clients: The income side of the national accounts showed that real household disposable income dropped by 0.8% quarter-to-quarter in Q1, cutting a chunk from the 1.3% gain in Q4 2025, as higher inflation ate into real household earnings. Sticky inflation over the coming year—despite the recent drop in energy prices—will mean that real household disposable income grows only slowly for the rest of the year. The household saving rate was estimated to have fallen to 8.9% in Q1, down from 9.6% in Q4 2025, as households smoothed through a fall in real incomes, keeping spending going. The saving rate still remains well above its 2015-to-2019 average of 6.5%, and the latest money and credit data for May—released yesterday—suggest that households are willing to save less over the coming months in order to keep smoothing their spending through the energy price shock. So, we continue to think that consumers’ spending can help GDP growth hold up over H2. “GDP fell by 0.1% in April, suggesting activity has started to soften as we moved into the second quarter. That shift highlights how quickly conditions have changed and raises the prospect that the first quarter may prove to be a peak for growth rather than the start of a sustained recovery. “The broader backdrop remains uncertain. While a ceasefire between the US and Iran has helped ease immediate pressure on energy markets, it remains a fragile agreement with key details still unresolved. That leaves the risk of renewed volatility in energy prices firmly in place, which continues to cloud the outlook for inflation and continues to negatively impact consumer and business confidence.Continue reading...