Middle Britain feeling the pinch

By Jennifer Hill

LONDON (Reuters) - Disposable income among "middle Britain" families is falling as the cost of living rises, research shows.

The average household had 133 pounds a week of disposable income in February, down 5.2 percent or seven pounds on a year ago, as hikes in the cost of living take their toll.

Households earned around 17 pounds a week more before tax during February than they did a year earlier, but this increase was more than offset by a 24 pound jump in the weekly cost of essentials such as food, transport and fuel.

The fall in disposable income was driven by a 6.2 percent jump in transport costs during the past year, with petrol soaring by 20.3 percent, according to research carried out by the Centre for Economics and Business Research (CEBR) for supermarket group Asda.

At the same time, the price of food and non-alcoholic drink increased 5.6 percent, while housing, fuel and power costs rose 3.5 percent in the year to February.

These rises were partly offset by a 4.6 percent drop in the price of clothes and shoes, while the cost of communication goods and services fell by 3.9 percent.

CEBR warned that the squeeze on spending is likely to get worse as the economy slows.

"As the impact of the credit crunch feeds through to the real economy, earnings growth will continue to cool through 2008," it said.