UK income growth has lagged European rivals since 2010, research shows

Although many major economics have experienced sluggish income growth, the UK has suffered particularly acutely among European peers.

Household income growth in the UK has lagged major European rivals since 2010, leaving people thousands of pounds worse off than they might otherwise have been.

New research from the Resolution Foundation shows that household disposable incomes have increased just 0.5 per cent a year since 2010, or around £140 a year.

This means household incomes grew by just seven per cent over the period, a very poor record compared to the recent past. Over the prior 14 years, household income growth was more than five times as strong.

Although many major economics have experienced sluggish income growth, the UK has suffered particularly acutely among European peers.

France, Germany and the Netherlands have all outperformed the UK in the previous 14 years. If the UK had matched these countries, the typical family would have been £2,700 a year richer by 2022-23.

“While global economic shocks have been a major factor, Britain’s recent record is poor compared to both its own history and many of our European neighbours,” Lalitha Try, economist at the Resolution Foundation, said.

The biggest contributor to the slowdown in income growth has been sluggish productivity growth, which has barely improved since the financial crisis.

Productivity is the main determinant of real wage growth in the long run. Without increases in productivity, wages cannot rise sustainably without causing inflation.

What household income growth there has been, is largely a result of an increasing employment rate, meaning more and more people have entered the workforce.

The UK’s employment rate increased from 70.3 per cent at the start of 2010 to reach a record 76.2 per cent on the eve of the pandemic. Since then, however, it has fallen back to 74.3 per cent.

“Britain will need to reverse its dire record on productivity growth, and repeat its 2010s success on jobs growth, if the country is to enjoy a long overdue return to rising living standards over the next parliament,” Try said.