New research indicates a significant deterioration in household finances across the United Kingdom, with nearly six in ten families reporting they are financially worse off compared to the previous year. The latest figures from the Asda Income Tracker highlight a concerning slowdown in growth during December, leaving the average household with £256 per week in discretionary income.
Sharp Decline in Spending Power
The data reveals a stark picture of financial strain, particularly for lower and middle-income earners. The bottom twenty per cent of earners experienced a substantial 5.0 per cent year-on-year decline in their spending power. This alarming drop resulted in a weekly deficit of £73 for these households, severely limiting their ability to cover non-essential expenses.
Middle Earners Hit Hardest
Households with annual incomes between £25,000 and £41,000 have been disproportionately affected, now facing a 7.1 per cent reduction in their financial standing compared to the same period last year. After accounting for essential costs such as housing, utilities, and food, these families are left with a mere £12 per week for discretionary spending, highlighting the intense pressure on middle-earning budgets.
Expert Analysis on Economic Trends
Sam Miley, Head of Forecasting and Thought Leadership at the Centre for Economics and Business Research (Cebr), provided context to these figures. "Overall, 2025 has been a mixed year for the Income Tracker," Miley stated. "Low inflation and strong earnings growth saw nominal discretionary incomes rise to record highs at the start of the year, before increases to employment taxes and wage floors in April increased cost pressure on businesses."
Miley explained that these factors contributed to stronger inflation and weaker labour market conditions, causing growth in the Income Tracker to stagnate. While the fourth quarter of 2025 showed some signs of recovery for household purchasing power, this improvement was largely attributed to a slowdown in underlying price pressures rather than an acceleration in earnings growth.
Future Outlook Remains Uncertain
Looking ahead to 2026, Cebr expects the current trend to continue throughout the first half of the year, despite an uptick in inflation observed in December. The competing influences of easing price pressures and weakening earnings growth are creating substantial uncertainty for future performance, according to economic forecasts.
Retail Response to Financial Challenges
In response to these ongoing financial difficulties, an Asda spokesman emphasised the supermarket's commitment to supporting households. "Asda is committed to continuing to support households navigating financial challenges in the new year and is consistently named the lowest-priced supermarket in independent price comparison surveys by both Which? and The Grocer," the spokesman confirmed.
This financial landscape underscores the continuing challenges faced by UK households as they navigate the complex interplay of inflation, wage growth, and essential living costs in the current economic climate.
