New data from Asda’s Income Tracker shows that 60% of UK households experienced a drop in weekly disposable income in August, as rising costs for essentials like food and transport continue to outpace wage growth.

The gap between income and everyday costs is widening with lower-income households facing a shortfall of £74 per week between earnings and what they need to spend on everyday essentials.

The data showed inflation remains high at 3.8%, its joint-highest level since January 2024 with food and non-alcoholic drink prices increasing for the fifth month in a row reaching 5.1% – also the highest level since January 2024.

Low-income households were the hardest hit, with disposable incomes falling by 3.2%, 31.8%, and 3.2% respectively across the bottom 60% of earners. Middle-income households saw income fall for the second consecutive month, with further declines expected if inflation persists.

In contrast, high-earning households are bucking the trend with wage growth outpacing inflation, shielding them from the cost of living pressures. Cebr, which produces the Income Tracker on behalf of Asda, warned that if the current trajectory persists, the UK risks evolving into a ‘dual-speed’ economy, where earnings growth remains strong for the highest earners, while the lowest earners see their incomes flatline.

“The Income Tracker showed its weakest annual growth in over two years in August, as inflation remained sticky at nearly twice the Bank of England’s target. The fact that inflation is concentrated in essential spending categories is bad news for consumers, who are seeing more of their post-tax income covering food and household bills. Looking ahead, there is a risk that the Income Tracker starts to decline as we head into the crucial fourth quarter, presenting a risk to business health too.”

Sam Miley, Head of Forecasting and Thought Leadership, Cebr.

A separate survey by the British Retail Consortium (BRC) also reported growing concerns about the cost of living in the year ahead.

The survey of 2,000 people, conducted by Opinium, found people’s biggest concern was “prices rising faster than wages”, with 57% of respondents agreeing (61% among working people). This was higher than concerns around tax rises (49%) and rising unemployment (26%). 

Retail price inflation has been rising steadily over the last year, accelerated by the impact of the previous Budget, which significantly increased employment costs, and introduced a new packaging tax on retail businesses, said the BRC.

“The Government risks losing the battle against inflation and working families are understandably worried. With many people barely recovering from the last cost of living crisis, the Chancellor will want to protect households and enable retailers to continue doing everything they can to hold back prices,” commented Helen Dickinson, Chief Executive at the British Retail Consortium.

The BRC is warning that food inflation will rise and remain above 5% well into 2026 if the retail industry is hit by further tax rises at the Autumn Budget in November.