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Take-home pay in 2017 lower than pre-crisis levels, says EY report

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Take-home pay in 2017 will be lower than pre-crisis levels, says an EY report.

The EY ITEM Club Special report on consumer spending is based on HM Treasury figures and forecasts from the firm's chief economists.

Projections suggest the average household income will increase by between 1.8% and 2% in 2015 and 2016 – well below the average pre-recession rate of 3.7%.

The report also predicts the "squeezed middle" in employment will fare the worst between now and 2017. It suggests that increases in the national minimum wage and tax allowance will help those in the lowest earning bracket, while higher-skilled workers will gain from "the traditional benefits of growth".

However, strong growth in labour supply and increased automation will subdue the wages of "routine white collar and skilled manufacturing jobs", according to the research.

Martin Beck, senior economic advisor to the EY ITEM Club, said that although household incomes are gradually increasing, people do not "have more money in their pockets".

"Real wages are being held back by strong growth in the supply of workers and the fact that firms are facing increased non-wage costs, such as new pension schemes," he said. "We expect this trend to continue for several years to come and it will be mirrored with a slowdown in consumer spending growth.”