One-in-five households ‘worse off’

A fifth of UK households have seen a fall in income over the last quarter, a new survey has found, which may make life much harder for those struggling to pay off credit card debt or potentially facing repossession.

The study by Deloitte also found that Britons are mainly downbeat about their prospects for 2012, with 53 per cent feeling pessimistic about their income outlook.

According to the Quarterly Tracker, seven per cent of households have experienced a job loss in the past three months and a combination of rising food, transport and utilities have pushed prices up as well, further squeezing people.

Reductions in income have not just come with job losses, as a loss of overtime, fewer bonuses and an increase in part-time working have all taken their toll.

Chief economist at Deloitte Ian Stewart said: "A fierce squeeze on disposable income and high levels of macroeconomic volatility pushed the consumer sector back into recession in 2011."

He added: "The UK has generated far higher levels of inflation over the last year than any other industrialised nation and this has hit consumer spending power."

The research also found that discretionary spending has fallen, chiefly through consumers buying cheaper items like clothes, rather than fewer of them.

One brighter spot for consumers has been a recent fall in inflation, with the Consumer Prices Index rate dropping to 4.8 per cent in November.

This may mark the initial fulfilment of predictions by the Bank of England and others that inflation is set to fall through the coming months, easing some of the strain on consumers.

By Joe White