Despite the economy trying to dodge a recession in 2023, one in four UK homes may struggle to pay their electricity and food bills.

Despite the economy trying to dodge a recession in 2023, one in four UK homes may struggle to pay their electricity and food bills, according to a reputable think tank.

In direct contrast to the pessimistic predictions of the Bank of England and the International Monetary Fund, the National Institute of Economic and Social Research predicted that the UK will not see a recession this year.

While warning that middle-income households have seen a reduction in their household incomes of up to £4,000 over the past year, its analysts also exposed the damage caused by the cost-of-living problems.

The decline in gas prices and the markets' calming effects of a return to the conventional fiscal policy has recently brightened the UK's economic prospects. Nevertheless, many believe that the UK will have one of the poorest economic performances among major nations after the IMF significantly cut its growth forecasts last week.

NIESR anticipated a weak 0.2% increase this year, followed by 1% growth in 2024 and 1.6% growth in 2025. Even though the UK will avoid a recession in any quarter of 2023, the NIESR cautioned that millions of families "will definitely feel like a recession."

It expects that 7 million households, or one in four, will not be able to cover all of their food and energy costs with their salaries in the year beginning in April, up from one in five the previous year. Despite a decline, energy costs are still significantly higher than they were prior to the Ukraine conflict, and government help is being constrained.

Additionally, since salaries are unable to keep up with double-digit inflation, British people are seeing a "permanent" decline in living standards, according to analysts. The BOE's 2% objective for inflation won't be reached, according to NIESR, until the second half of 2025.

Middle-Class Pinch

As the poorest receive further government assistance, the middle classes are the ones who suffer the most. Middle-class households will have a 7% to 13% decrease in their discretionary income, which may amount to a loss of £4,000.

According to NIESR Director Jagjit Chadha, "what we've observed is that the shocks that have come along have gradually made us poorer per person."

“The whole world appears to be suffering from this gloom, but the UK appears to be performing poorly on many indicators, and I find that to be a major concern”, he added.

(Bloomberg.com, Bbcnews.co.uk)