Rising inflation, low pay and increased debt are expected to affect millions of Britons next year, bringing more financial hardship for people.
The conditions will lower living standards for British households in 2017 as the country’s economy adjusts to the post-referendum environment, experts told The Guardian.
In the June 23 referendum, about 52 percent of British voters opted to leave the EU, while roughly 48 percent of the people voted to stay in the union.
“The specter of significantly higher inflation is a real concern. Many households have still not recovered from the last big squeeze on incomes in the aftermath of the financial crisis. The risk is that this new pressure on household budgets could tip many more people into financial difficulty,” said Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline.
“As a society we need to prepare for what could be a significant increase in problem debt in the years ahead,” she added.
According to economists at the National Institute of Economic and Social Research, inflation will increase by 3 percentage points, from a current rate of 1 percent to almost 4 percent in 2017.
The reason, the economists gave, is the dramatic fall in the value of the pound because the Brexit vote will make imports more expensive.
They predicted that wage growth will be weaker, as firms want to control costs amidst slowing economic growth and heightened uncertainty.
There are also signs that household debt is returning to unprecedented highs since the financial crisis in 2008.
According to the British Bankers’ Association, consumer credit is increasing at the fastest rate in almost 10 years, as record low interest rates trigger demand for personal loans and credit cards.
“More people are turning to credit … While this borrowing might be manageable now, a sudden change in circumstances could lead to debt problems,” said Gillian Guy, chief executive of Citizens Advice.
Peter Tutton, head of policy at debt charity StepChange, said the majority of Britons were only just getting over the last period of declining real wages, when inflation outstripped pay growth after the financial crisis.
“A further squeeze on household incomes, made worse by the freeze on benefit uprating, will leave even more households struggling. With over seven million people already using credit to pay for everyday essentials, there is a real danger of more falling into severe problem debt,” Tutton stated.
Attention is now truing to the Chancellor of the Exchequer, Philip Hammond, who is expected to make a statement to the Parliament on 23 November.
He has already signaled that he would ease the speed of austerity put in motion by his predecessor, George Osborne.
Frances O’Grady, general secretary of the TUC, said that the last wage squeeze caused more families to struggle to make ends meet without turning to borrowing
“The chancellor should address these fears in the autumn statement, and take action to boost jobs and wages. That means new investment in infrastructure such as roads, rail, green energy and homes, and increases in the national minimum wage,” O’Grady said.