Middle-income households have seen the amount of spare cash they have plunge by £135 a month amid the spiralling cost of living crisis, a new report has found.
The research by market insights firm Retail Economics found that four out of five households are facing double-digit declines in money left over for non-essentials each month compared to last year.
It comes after inflation in the UK soared to 9.4% in the year to June 2022, the highest level seen for decades.
Retail Economics analysed the impact soaring inflation has had on discretionary income – meaning cash available for non-essential items after essentials such as housing, food and fuel have been purchased – and found that in June 2022 compared to June 2021:
The least affluent saw their monthly discretionary income fall by 15.6%, equivalent to £77
People on middle incomes saw their monthly discretionary income fall by 12.1%, equivalent to £135
The most affluent saw their monthly discretionary income fall by 3.2%, equivalent to £146
The report found that two-thirds (63.4%) of households are setting strict limits on the amount they spend on food shops, and three quarters (74.1%) are set to cut back spending on luxuries such as takeaways.
The news came as a poll by Ipsos found that 45% of British adults thought inflation was one of the most important issues facing the country.
The figure represents an increase on the 40% who listed inflation as a concern in June, and also the highest recorded level of concern since Ipsos started its monthly issues tracking survey in the early 1980s.
It comes as MPs called on the government to immediately change its "out-of-date" energy bill support for households before the cost of living crisis accelerates further.
When the government outlined its package of support for households, the energy price cap was forecast to rise to around £2,800 in October. Now the latest forecasts set the next price cap at £3,244.
To help people cope with soaring energy bills, then-chancellor Rishi Sunak pledged £400 energy bill discounts to all households, £650 to another eight million low-income households, £150 for those on disability benefits and £300 for pensioners.
However, with energy bills predicted to spike significantly further than initially predicted, this is no longer enough to offset the rise, according to the report by the Business, Energy and Industrial Strategy (BEIS) committee.
“Once again, the energy crisis is racing ahead of the government,” said Darren Jones, the chair of the committee.
“To prevent millions from dropping into unmanageable debt it’s imperative that the support package is updated and implemented before October, when the squeeze will become a full-on throttling of household finances and further tip the economy towards recession.”
The report also said that ministers need to consider whether they should scrap the price cap on energy bills.
This could be replaced by discounted energy bills for the most vulnerable, and rules that cap the difference between a supplier’s cheapest and most expensive deal to help everyone else.