Outlook for UK Households, the Devolved Nations and the English Regions

We project that the living standards for people in income deciles 2-5 will not return to pre-pandemic levels until the end of 2026: real household incomes are growing more strongly in 2023 but real wages fell the most for the poorest in 2022. There are significant economic benefits from the 2023 increase in the National Minimum Wage and the National Living Wage: we find that households in the bottom income decile will see a 5-6 per cent rise in their consumption in 2023-24; higher wages will also encourage some poor people into work, with projected falls in both inactivity and unemployment by about 2 percentage points in the second bottom decile. The number of destitute people will fall to around 1.1 million by the end of 2024, of whom approximately 300,000 are children, with the highest concentration in London (around 250,000): the fall from 1.5 million in 2022-23 is largely the result of an increase in real wages in 2023-24. We project house prices to fall by around 6.5 per cent between now and the second quarter of 2025, taking some 50,000 additional households into negative equity: the total number of homeowners whose property is worth less than the value of their remaining mortgage will reach approximately 166,000. The three devolved nations and almost all English regions have returned to pre-pandemic levels of economic output as measured by Gross Value Added (GVA): only parts of the South-East and the West Midlands are below the level in the fourth quarter of 2019. Addressing London's productivity paradox – highest level in the United Kingdom but slowest growth rate except the South-West – requires an overarching strategy: much better coordination across multiple tiers of governments (central government, the Greater London Authority and London boroughs) is needed to design targeted investment and deliver more affordable housing, better access to more affordable transport, higher R&D spending and greater business investment (Box B).