UK living standards fall despite fastest growth in G7 – business live

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22m ago

Introduction: UK living standards fall despite rise in growth

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK living standards fell in the first quarter of the year, even though the economy grew, highlighting the challenge facing Andy Burnham as he pledges to “lift the country’ back up”.

New data from the Office for National Statistics this morning shows that real household disposable income per head shrunk by 0.8% in the first quarter of 2026, showing that people were left with less money to spend after taxes.

The ONS reports that while pay and income from property rose in the quarter, this was more than wiped out by higher taxes on wealth and income, and a fall in ‘net social contributions’.

The households’ saving ratio – which estimates the percentage of disposable income Britons save rather than spend – fell by 0.7 percentage points to 8.9%, driven by a fall in the contribution of non-pension saving. That indicates people had less money to put aside, as rising prices pushed up the cost of living.

In better news, the ONS confirmed that the UK economy grew by 0.6% – that is the fastest growth recorded by any G7 country in January, something for Rachel Reeves to cling onto as Burnham weighs up who to appoint as chancellor should be succeed Sir Keir Starmer as PM soon (as appears likely).

But the fall in disposable income highlights that GDP growth alone is not enough to create a healthy economy that works for everyone.

Director of Economic Statistics Liz McKeown says:

“Our latest set of figures show no revision to economic growth in the first quarter of this year. However, growth for 2025 was revised down a little.

“Services were the main driver of growth in the latest quarter, with strength in computer programming, wholesale and advertising only partially offset by falls in rental companies and recruitment agencies. Production and construction also both grew overall, although construction only partly reversed its recent weakness.

“The household saving ratio continued to ease at the start of 2026 but remains above its pre-pandemic levels.”

The agenda

7am BST: ONS releases UK quarterly accounts for Q1 2026

7am BST: German retail sales for May

8.55am BST: German unemployment report for June

2pm BST: US house price index for April

Key events

7m ago

2025 growth revised down

10m ago

Table: How UK topped G7 growth table in Q1

18m ago

Why real household disposable income per head fell

22m ago

Introduction: UK living standards fall despite rise in growth

2025 growth revised down

Today’s data also shows that the UK economy grew less than previously thought in the first calendar year of the Labour government.

The ONS now estimates that UK GDP rose by 1.3% during 2025, down from its previous estimate of 1.4% growth.

As you can see on this chart, the ONS lowered its estimate for growth in the second half of 2025, while also nudging it up a little for the second quarter of last year.

Table: How UK topped G7 growth table in Q1

The UK’s growth of 0.6% in January-March outpaces the rest of the G7, just!

The US and Japan were close behind, with quarterly growth of 0.5%, while Italy and Germany both grew by 0.3%.

Canada stagnated, while France is on the brink of a technical recession after its GDP fell by 0.1% in Q1 2026.

Why real household disposable income per head fell

The fall in UK real household disposable income (RHDI) in the first quarter of 2026 came despite increase in income in these areas:

compensation of employees, by £8.2bn

net property income, by £2.1bn

gross mixed income, by £1.5bn

But….this was offset by an increase in taxes on income and wealth, by £6.9bn, and a fall in net social contributions, by £5.1bn.

The Office for National Statistics says:

The impact of the reduction in the tax-free allowance for capital gains, and the resulting increase in Capital Gains Tax payments, contributed to the increase in taxes on income and wealth.

Introduction: UK living standards fall despite rise in growth

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK living standards fell in the first quarter of the year, even though the economy grew, highlighting the challenge facing Andy Burnham as he pledges to “lift the country’ back up”.

New data from the Office for National Statistics this morning shows that real household disposable income per head shrunk by 0.8% in the first quarter of 2026, showing that people were left with less money to spend after taxes.

The ONS reports that while pay and income from property rose in the quarter, this was more than wiped out by higher taxes on wealth and income, and a fall in ‘net social contributions’.

The households’ saving ratio – which estimates the percentage of disposable income Britons save rather than spend – fell by 0.7 percentage points to 8.9%, driven by a fall in the contribution of non-pension saving. That indicates people had less money to put aside, as rising prices pushed up the cost of living.

In better news, the ONS confirmed that the UK economy grew by 0.6% – that is the fastest growth recorded by any G7 country in January, something for Rachel Reeves to cling onto as Burnham weighs up who to appoint as chancellor should be succeed Sir Keir Starmer as PM soon (as appears likely).

But the fall in disposable income highlights that GDP growth alone is not enough to create a healthy economy that works for everyone.

Director of Economic Statistics Liz McKeown says:

“Our latest set of figures show no revision to economic growth in the first quarter of this year. However, growth for 2025 was revised down a little.

“Services were the main driver of growth in the latest quarter, with strength in computer programming, wholesale and advertising only partially offset by falls in rental companies and recruitment agencies. Production and construction also both grew overall, although construction only partly reversed its recent weakness.

“The household saving ratio continued to ease at the start of 2026 but remains above its pre-pandemic levels.”

The agenda

7am BST: ONS releases UK quarterly accounts for Q1 2026

7am BST: German retail sales for May

8.55am BST: German unemployment report for June

2pm BST: US house price index for April