Dark clouds gather over 1.5 mln British households: think tank

LONDON, May 11 (Xinhua) -- In Britain, inflation is expected to be persistent, real income is bound to decline and household budgets will be squeezed, a leading British think tank said on Wednesday.

An estimated 1.5 million households across the country are expected to face food and energy bills that outstrip their disposable income, according to the National Institute of Economic and Social Research (NIESR).

The Russia-Ukraine conflict is expected to push inflation to new heights and to result in a drop in economic output and real income, it said.

The institute said that the country's gross domestic product (GDP) would increase by 3.5 percent in 2022, 0.8 percent in 2023 and 0.9 percent in 2024.

A combination of shocks -- Brexit, the COVID-19 pandemic and the recent rise in energy prices -- is set to radically reduce people's incomes, the NIESR said.

The NIESR said it expected inflation to average 7.8 percent in 2022 after peaking at 8.3 percent in the fourth quarter. The Bank of England's estimate was 10 percent for the whole year.

Real incomes were projected by the NIESR to decline by 2.4 percent in 2022 and unemployment to rise to 5.1 percent in 2023.

The think tank urged the government to provide emergency support to cushion the income shock.

It suggested a Universal Credit (public subsidy for low-income people) uplift of 25 British pounds (30.9 U.S. dollars) per week between May and October 2022 and a one-off cash payment of 250 British pounds to each of the country's 11.3 million lower-income households.

The NIESR said it expected the Bank of England to further raise the interest rate throughout the year and the benchmark rate to reach 2 percent in the last quarter of 2022.

The think tank also noted that the central bank has to be very careful to try to strike a balance between "on the one hand, allowing inflation expectations to deanchor and, on the other hand, plunging the economy into a deep recession."