LONDON, March 4 (Xinhua) -- Living standards in Britain are expected to see a modest improvement this year, particularly in lower-income households, but the gains could be fragile as rising energy prices following the Middle East tensions risk reigniting cost-of-living pressures, according to a report from think tank the Resolution Foundation.
The Resolution Foundation's analysis, based on the latest Spring Forecast from the Office for Budget Responsibility (OBR), suggests that living standards for typical working-age households will rise 0.9 percent, or about 300 pounds (about 401 U.S. dollars), between the 2025-26 and 2026-27 fiscal years.
Lower-income families are expected to see a stronger improvement, with living standards projected to increase 3.9 percent, or around 800 pounds (about 1068.38 dollars). This represents one of the largest annual gains for poorer households in the past two decades.
However, the think tank warned that the improvement may be short-lived as the medium-term outlook remains weak.
OBR projections show real wages growing by just 1.4 percent between late 2025 and 2028, limiting momentum for sustained income growth. As a result, incomes for typical working-age households are expected to fall about 0.5 percent between 2026-27 and 2028-29, partially reversing gains.
At the same time, renewed volatility in global energy markets poses a fresh risk.
The Resolution Foundation estimates that sustained increases in oil and gas prices could add about one percentage point to British inflation and raise typical annual household energy bills by roughly 500 pounds (about 667.74 dollars).
Such increases would hit poorer households hardest. Energy spending represents more than twice the share of the total household budget for low-income families than for wealthier households, according to the think tank.
Britain's energy structure also leaves it particularly exposed to global price shocks. According to the Department for Energy Security and Net Zero, natural gas accounted for around 35 percent of total energy demand in 2024, heating most homes and generating about one-third of electricity.
Since gas-fired plants often set the marginal price in Britain's electricity market, rising gas prices quickly push up power costs across the system.
Recent market movements have highlighted this vulnerability. Following supply disruptions linked to the Middle East crisis, Britain's wholesale gas prices jumped about 75 percent within days, slightly outpacing increases in Europe's benchmark TTF market.
Higher wholesale costs could also spread through the wider economy. While household tariffs are partly regulated under the energy price cap, businesses face wholesale prices more directly, increasing the risk that higher energy costs will feed into food and consumer prices.
At the same time, economists say the government has limited room to cushion households from another energy shock.
Speaking at a conference on Tuesday, the OBR's David Miles said the surge in oil and gas prices driven by the conflict in Iran was "unambiguously bad" for a major energy importer such as Britain. He warned that any renewed government support would come at a difficult time for public finances.
Official projections show Britain's public debt rising to more than 95 percent of GDP by the end of the current parliamentary term, limiting the scope for large-scale support measures similar to those introduced during previous energy crises.
