UK households will be £480 worse off because of Iran war

Think tank Resolution Foundation say they’ve assessed the difference in projected household living standards between the current situation and if the war hadn’t begun.

They factored in the rising energy prices, inflation and the impact of current government support, such as lifting of the two-child benefit cap.

They concluded living standards of the average household were previously on track for 0.9% growth but it’s now set to decrease by 0.6% this financial year.

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They believe this translates to the average UK household being £480 worse off as a result of the Iran War.

It’s believed the average income growth for the poorest 20% is now set to be just 1.2 per cent, which is down from 2.8% before the conflict.

However families with three or more children in the bottom half of earnings will see a 7.7% income growth compared to 0% for ‘poorer families’ with fewer than three kids.

Resolution Foundation is encouraging the Government to offer ‘targeted support to struggling households’.

Chief economist at the Resolution Foundation, James Smith, warned ‘this squeeze will run right through the income distribution’.

James said: “Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels – meaning many households face a decline in their purchasing power this year.

“This squeeze will run right through the income distribution.

“Lower-income households will still see some income growth thanks to a long-awaited rise in real benefit levels but inflation will likely knock more than a percentage point off what they would have gained.

“For those in the middle and towards the top of the income distribution, even the thin growth they had been expecting has tipped into negative territory.”

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The head of Energy UK has said it is inevitable that the next price cap update will see bills rise, as a think tank warned the Iran war could make UK households hundreds of pounds worse off.

Dhara Vyas, chief executive of the industry body, voiced support for the Government to offer targeted help for those hit hardest by price hikes in the short term, and said the long-term solution was investment in clean power.

The Resolution Foundation said in its latest analysis of the impact of the conflict on the UK that the average household could be £480 worse off.

This is because rising energy prices are likely to mean that households will see income fall by 0.6% rather than the 0.9% growth they were previously on track for.

Speaking at a panel discussion hosted by the think tank, Ms Vyas said: “I think it’s inevitable that bills will go up on July 1, because we are more than halfway through the observation window, but I don’t know yet by how much.”

She said anyone working in the energy industry wakes up every morning and checks the gas price because there is no knowing what has happened overnight.

The Energy UK boss added: “So it is wildly unpredictable.

“The things we know for sure I think are our energy security is more at risk now than it has ever been.

“And I mean that not to kind of create a sense of fear about supply.

“That’s not what I mean.

“What I mean is our security in terms of having control over it.

“So investing in clean power is the way forward.”