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Young households hit by 'abrupt' slowdown as top earners see their fortunes grow

A new report has found a divided Britain terms of income and living standards. Credit: PA

Young people and low-income households have suffered an "abrupt" slump in living standards in recent months while top earners' wealth rose, according to a new report.

The Resolution Foundation pointed to a divided country economically in the year leading up to June's General Election.

It found households that were already squeezed financially were continuing to suffer reductions in their real spending power.

By contrast, the top 1% of households enjoyed a "rapid recovery" from recession, and are now on the brink of having a record share of the nation's income at 8.7%.

The report concluded "just about managing" families on low and middle incomes are "no better off today than they would have been 15 years ago".

Families were among the worst hit. Credit: PA

Young families aged 25-34 were among the worst hit, with average incomes in this group no higher than they were in 2002/03.

They were the only group whose incomes have failed to return to pre-crisis levels, said the report.

In the same 15-year period, pensioner incomes grew by 30%, it found.

Over the last year, those who were already squeezed suffered lower income growth than the wealthy - while living costs also continue to rise,

0.4%
Income growth for low and middle-income families in the year to June
1%
Income growth for the top half of earners in the year to June

There was also a significant gap between renters and home owners, the report found.

Families in all rented properties have seen little or no income growth in recent years, while home-owners with mortgages enjoyed above-average income growth of 1.7%, according to the think tank.

Pensioners have seen income growth while low earners remained far more subdued. Credit: PA

It found that two in five low and middle income families said they were unable to afford to save £10 a month.

And 42% of the income group reported they cannot afford a holiday away for at least one week per year - up from 37% before the 2008 financial crisis.

The think tank's senior economic analyst, Adam Corlett, said that the Government was failing to deliver real living standard growth to the "just about managing" group identified by Theresa May.

"Over the last 15 years and four prime ministers, Britain has failed to deliver decent living standards growth for young families and those on low incomes. Rising housing costs have added further financial pressures," he said.

"Not only do we need to get incomes growing again but we need to ensure that that growth is spread evenly across the country, across generations and between rich and poor."