British households are only halfway through a two-year cost of living crisis, with average incomes likely to fall by more than £2,000, a leading think tank has warned.

Typical disposable incomes for working-age family households are on track to fall by 3% in this financial year, and by 4% in the year to April 2024, according to the Resolution Foundation.

Only incomes of the very richest will rise, according to the think tank’s annual Living Standards Outlook for 2023, while middle-income households will struggle to make ends meet after an average £2,100 loss.

The warning comes amid a rash of strikes by workers demanding pay rises closer to the average inflation rate of 10.7%.

The think tank said that while the headline rate of inflation was likely to fall over the coming months in response to tumbling international gas and petrol prices, the cost of living would still remain cripplingly high for many households.

Energy bills are expected to increase after “the slimming down of government support”, pushing the typical energy bill to rise from £2,000 in 2022-23 to £2,850 in 2023-24.

The drop in the cost of wholesale gas is likely to reduce the cost to the Treasury of government energy subsidies directed at businesses and households, but longer-term contracts covering the supply of gas to households are expected to keep retail prices high for at least the rest of the year.

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