Households face worst squeeze since the 1870s

BRITISH households are facing the biggest cash squeeze since the 1870s, a report by Deloitte out today claims.

Disposable income is set to fall by about two per cent this year, or the equivalent of about £780 per household, the report claims.

The drop is driven by rising inflation, which could rise above five per cent this year, causing real earnings to fall for the fourth successive year in a row.

“Pay growth is unlikely to catch up with inflation any time soon... It will take until 2015 or so for incomes to get back to their 2009 peak,” said economic adviser to Deloitte Roger Bootle.

“This year will see falling real earnings, falling real house prices and rising unemployment,” he added.