UK households are set to face a significant financial strain, with an average loss of £480 this year due to soaring energy bills driven by the ongoing conflict involving Iran. The Resolution Foundation warns that this spike in energy costs is eroding living standards across the country.
Market analysis from the Foundation indicates that median working-age households will experience this financial setback compared to pre-conflict projections. The impact is most severe among households in the bottom income fifth; their income growth is expected to slow dramatically from 2.8% to just 1.2% this year.
However, there is a silver lining for larger families in the lower-income brackets. The removal of the two-child benefit cap is projected to boost incomes for households with three or more children by 7.7%.
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Overall, many households that were initially forecasted to see modest income gains will instead face a 0.6% decline over the financial year—a difference equivalent to £480. James Smith, chief economist at the Resolution Foundation, emphasizes that “this squeeze will run right through the income distribution,” affecting both middle and higher income groups, where expected growth has now turned negative.
Smith also notes that while any de-escalation in the conflict is positive, much of the financial damage to households this year has already been done.
The warning comes amid rising political tensions, with Republicans urging former President Donald Trump to take a harder line, while leading Democrats caution against resuming hostilities due to the risks involved. Nikki Haley, former UN ambassador, described the current ceasefire as a tense test of willpower, suggesting Iran is banking on Trump backing down.
Conversely, Senate Intelligence Committee member Mark Warner highlighted the dangers of increasing military involvement in Iran, explaining that securing Iran’s volatile uranium stockpile would require extensive ground forces and pose significant operational risks.