CEBR: Households will see a rise in real income in 2013

Households are likely to see a rise in real income in 2013 according to research by Centre for Economics and Business Research (CEBR).

As the economy begins to recover and inflation falls the spending power of income seen by UK households will increase for the first time since the credit crunch, according to the CEBR forecast.

Those classified as poor to middle income earners are likely to benefit most, with a 1.5% and 1% forecast increase in income spending power respectively. The richest households are likely to see a lower increase of 0.7% in real income due to cuts in top bonuses and some tax allowances.

Since the beginning of the recession many households have seen their income levels hit hard by slow wage increases and high inflation which can eat away at the real value of any income earned. Inflation hit a high of 5.2% in September 2011 but has seen a steady decline since then and now stands at 2.6%.

Similar rises in spending power are also forecast for 2014 and 2015.

A rise in real income for households could come as welcome relief to the retail sector after a difficult year and CEBR forecast a 2.5% rise in retail sales by mid 2013, with overall economic growth at 0.5% next year.

Daniel Solomon, from CEBR, said:

"There is finally a glimmer of light at the end of the tunnel for retailers, after four barren years. Conditions will still be tough, just slightly easier than before."