NI Poorest 'Suffered Most' During Downturn

Northern Ireland’s poorest households have suffered most from a decade of soaring energy and food prices, exacerbated by a fall in the value of real wages, according to a report from PricewaterhouseCoopers.

PwC’s latest UK Economic Outlook says the lowest-earning 10% of the population have experienced consumer price inflation of 40% in the decade to the end of 2013.

This compares with inflation of 32% for the richest 10% of households, with the difference equivalent to an extra burden on the poorest households of about £1,000 per year.

Median real UK household incomes are now around 7% below the peak levels seen in 2007. While incomes are expected to recover gradually from 2015, PwC says it will be 2019 before they are back above pre-crisis peak levels.

Average real wages have declined sharply since 2008 and are unlikely to return to pre-crisis peaks until around 2020.

PwC also says that around 80% of the net increase in employment since 2008 has been in sectors with below average pay levels such as retailing, hotels and catering.

Dr Esmond Birnie, PwC’s chief economist in Northern Ireland, said the UK economic recovery has so far been job-rich but wage- and productivity-poor.

"The sharp decline in real wages reflects a number of factors, including falling productivity, January 2011’s VAT increase and rising import prices, although these effects are now starting to fade as the pound has risen and inflation has returned to target," he said.

"Real household incomes should therefore gradually begin to recover, helped by strong employment growth and continued real increases in the basic state pension.

"Poorer households have suffered from higher effective inflation rates on average over the past decade, due in particular to rising food and energy prices, which represent a relatively high percentage of their budgets.

"There is also some evidence that Northern Ireland, Wales and Scotland have been disproportionally impacted by high energy prices and this is reflected in particularly high levels of fuel poverty rates in Northern Ireland where, according to the Northern Ireland Fuel Poverty Estimates, around 42% of households are in fuel poverty.

"That compares to around 29% in Scotland and Wales, whereas fuel poverty is much less prevalent in England where the West Midlands is worst affected, with around 14% of households there in fuel poverty."

The report said Northern Ireland is likely to experience the lowest level of regional growth in 2014 at around 1.9%, with London and the South East forecast to grow at 3.1% and 3% respectively and all UK regions seeing stronger growth this year than in 2013.

Mr Birnie said: "With Northern Ireland having the highest level of negative equity amongst the UK regions, households need to bear in mind likely future interest rate rises in any decisions on mortgages or other longer term loans."

(IT/MH)