Households will see an increase in real income next year for the first time since the credit crunch struck, with middle-income earners and poorer families benefiting the most, according to research.

Key Points

  • CEBR says incomes will rise 1% for some households
  • Lower income households will see 1.5% increase
  • Economy set to grow by 0.5%

The Centre for Economics and Business Research (CEBR) predicts families will enjoy a much-needed increase in income - after inflation - next year as stubbornly high inflation recedes. It also forecasts a return to economic growth.

Real incomes for middle income and poorer households have fallen every year since the start of 2008 and are set to drop again this year by 0.2%, due to slow wage growth and high inflation.

But the CEBR reckons this will change as the economy recovers, with it forecasting growth of 0.5% next year.

Its research suggests real incomes will rise by 1% for middle-income households and by 1.5% for poorer households. The richest households will see a less impressive 0.7% rise, it says.

Similar rises are expected for 2014 and 2015, the CEBR adds.

'Glimmer of light for retailers'

It believes the rich will see their incomes grow the slowest despite the 5p reduction in the top income tax rate, due for April 2013, because top-end pay and bonuses are expected to be squeezed in 2013 and some tax allowances are also being scaled back.

The boost to consumer spending power should signal good news for retailers, which have suffered as people cut back.

The CEBR says it expected retail sales volumes to rise by 2.5% over the year to mid 2013, having risen by a paltry 1.1% in the past year.

CEBR economist Daniel Solomon says: "There is finally a glimmer of light at the end of the tunnel for retailers, after four barren years."

But he adds: "Conditions will still be tough, just slightly easier than before."