Research institute · Resolution Foundation
Energy Costs to Leave UK Households £480 Worse Off in 2026
Resolution Foundation analysis finds that higher energy prices stemming from the latest Middle East conflict will leave the typical British working-age household £480 worse off in 2026-27. Income growth forecasts have collapsed across most of the income distribution, with only families benefiting from the two-child limit abolition seeing meaningful real gains.
Source published Summarised
Key findings at a glance
- £480 How much worse off the typical British working-age household will be in 2026-27, compared with the pre-conflict path. The squeeze lands directly in the middle of the distribution.
- 1.2% Revised average income growth for the poorest fifth of households in 2026-27, after accounting for higher energy and food prices.
- 2.8% The pre-conflict Resolution Foundation forecast for the poorest fifth. The downgrade is 1.6 percentage points off the lowest earners' real income trajectory.
- -0.6% Revised income change for the middling working-age household over 2026-27, a swing from +0.9% growth to outright real-terms decline.
- 7.7% Year-on-year income growth still expected for bottom-half families with three or more children, thanks to the abolition of the two-child limit in Universal Credit.
- 0.0% Average income growth for all OTHER bottom-half families. No meaningful real-terms uplift this year for households without three or more children.
- 2% Eventual rise in UK food prices for every 10% rise in global food commodity prices, with peak inflation impact felt more than a year after the commodity shock.
- 2027 The year the inflation pass-through from the current conflict is still expected to be feeding through UK food prices.
What the report covers
Resolution Foundation Deputy Chief Executive Mike Brewer published this comment on 15 April 2026, after market forecasts for the week commencing 6 April made it possible to size the likely UK living-standards impact of the renewed Middle East conflict. The piece distils the effect on real disposable income across the working-age population, with a particular focus on where the squeeze lands hardest and which groups are partly insulated.
The headline £480 figure refers to the median working-age household. Resolution Foundation models distributional impacts because rises in essentials (energy, fuel, food) hit lower-income households disproportionately, as those categories make up a larger share of their budgets. The analysis compares income-growth scenarios pre-conflict versus post-conflict across income deciles and family types, with separate cuts for households benefiting from the abolition of the two-child limit in Universal Credit.
The picture splits in two. Bottom-half families with three or more children come out ahead because the two-child limit removal more than offsets the inflation hit. Everyone else, including the rest of the bottom half and the middle of the distribution, sees forecast growth either erased or turned outright negative. The piece points forward to a deeper Resolution Foundation cut on the fiscal and monetary implications, published the week after.
What this means for UK marketers
For UK marketers and ecommerce operators, the £480 figure is a planning input, not a headline. It tells you the typical household this financial year has less disposable income than the consensus forecast assumed three months ago, with direct implications across creative messaging, channel mix, and conversion design.
Discretionary spend is compressing unevenly. The lowest fifth is still seeing nominal income growth (1.2%) but it sits well below the pre-conflict forecast. The middle of the distribution is now in real-terms decline (-0.6%). Richer households see even larger absolute losses. "Middle-class disposable income" is no longer a safe assumption for 2026-27. UK digital marketing briefs that assume buoyant consumer confidence in mid-tier audiences need to be reset for the rest of the financial year.
Acquisition costs are about to get more expensive. Tighter household budgets do not reduce paid-media auction pressure, they intensify it as advertisers chase a shrinking pool of willing buyers. UK Google and Meta CPCs typically firm up when consumer confidence weakens, exactly when ecommerce operators most need them to soften. The defensive move is to shift more of the acquisition mix onto organic: invest in SEO and content earlier than budget would normally permit, and audit paid search accounts for waste before the auction tightens further. Conversion-rate work pays back faster than top-of-funnel spend in this environment.
Food and energy pass-through extends well into 2027. The Resolution Foundation methodology suggests a 10% rise in global food commodity prices feeds through to roughly a 2% rise in UK retail food prices, with peak impact more than a year after the commodity shock. ONS CPI readings for the rest of 2026 are likely to keep food and energy categories elevated, even if oil retraces. This is a multi-quarter price-sensitivity backdrop for retailers, not a six-week wobble. Plan promotional cadence, BNPL placement, and bundle architecture accordingly.
Tone matters more than discount depth. Households dealing with energy-bill anxiety read brand messaging that ignores the macro context as tone-deaf. The brands that performed best through the 2022-23 cost-of-living phase used straightforward language about value, transparent breakdowns of what was included, and avoided aspirational framing that read as out of touch. The same playbook applies now: lead with utility, price the proposition honestly, and skip lifestyle-aspirational creative until consumer confidence rebuilds.
How they got the data
Resolution Foundation's analysis combines its in-house living-standards micro-simulation model with market-derived energy-price forecasts taken at the close of week commencing 6 April 2026. The model projects post-tax-and-transfer income changes across the income distribution and across family types, holding pre-conflict policy assumptions constant so the conflict-driven inflation shock is isolated cleanly. The food-price pass-through estimate (a 2% UK food-price rise for each 10% rise in global food commodity prices, peaking more than a year after the commodity shock) is derived from analysis of the 2022 Ukraine-conflict episode.
The piece was authored by Mike Brewer, Resolution Foundation Deputy Chief Executive, and published on 15 April 2026. It accompanied an in-person event the same morning where the figures were first presented to invited press and policymakers, ahead of a broader Resolution Foundation programme of work on the fiscal and monetary fallout of the conflict.
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From Resolution Foundation · published 15/04/2026