On Tuesday, the Office for National Statistics is tipped to say that average earnings grew by 3.9 percent in December, down from 4.2 percent in November. Average earnings growth has been falling since June, when it was 8.8 percent. The following day, the official statistics body is tipped to say that inflation, as measured by the consumer price index, was unchanged in January from the preceding month at 5.4 percent. 

CPI inflation has been climbing since February 2020, when it was just 0.4 percent. 

Capital Economics chief UK economist Paul Dales, said that Britons face a “big squeeze” in real incomes due to the double whammy of higher energy prices and a National Insurance hike in April, coming alongside sub-par wage growth. 

He added that the planned 54 percent-plus increase in the energy price cap will push inflation to 7.5 percent, a level not seen since August 1991. 

“We think that CPI inflation held steady at a 30-year high of 5.4 percent in January, but that it will rise to 7.5 percent by April. 

And if we are wrong, it’s more likely to be because inflation was higher in January and will be higher than we expect by April,” he said. 

On Friday the ONS said that the economy grew by 1.1 percent in the fourth quarter, despite Omicron. 

However, GDP contracted by 0.2 percent in December, which Dales said has given the UK its first “taste of stagflation”. 

ING developed markets economist James Smith, said that the biggest challenge facing the economy is the cost-of-living crisis, with disposable incomes set to “decline noticeably”, leading to a fall in consumer spending. 

He added that even spending the billions in savings accumulated during the pandemic will not help. 

He explained: “Consumers have accumulated plenty of ‘excess savings’ – now totalling roughly 8 percent of GDP – and that will help to offset some of the income shock. 

“However, this buffer is more heavily focused in higher-income earners, who are less likely to cut their spending dramatically in response to rising living costs.” 

According to Bank of America, around half of UK consumers are cutting back on spending in advance of the NI hike and energy price cap surge. 

UK economist Robert Wood said: “The real income squeeze this year differs in the important respect that it is anticipated.”