Reality Check: Will Brexit cost households £500 this year?

Related Topics
image source, Getty Images

The claim: Households would on average be £500 worse off in 2017 than they were in 2016, due to Brexit.

Reality Check verdict: This is based on an independent forecast that prices will rise faster than wages in 2017. The forecaster does not blame all its predicted £500 fall on Brexit. The Office for Budget Responsibility, on the other hand, predicts that wages will rise slightly faster than prices this year. We don't know at this point which one will turn out to be correct.

Liberal Democrat Brexit spokesman Nick Clegg has been talking about the costs of leaving the European Union.

Citing the inflation caused by the deteriorating exchange rate, he said: "The Brexit squeeze means the average household is likely to be £500 or worse off in 2017 compared to 2016."

The research that he is citing comes from the Centre for Economics and Business Research, which came up with the figure but does not attribute it to a "Brexit squeeze".

It blames the expected inflation partly on the weaker pound but also on rising prices of commodities such as oil, which are set globally.

The CEBR says that household incomes will fall this year because it expects prices to rise faster than earnings - specifically, it expects inflation this year of 2.7% with average earnings rising 2.2%.

If this prediction is accurate, then it would indeed be reasonable to expect a fall in the real value of household incomes.

The precise amount predicted per household - £500 - is less important than the direction expected.

But, by comparison, the Office for Budget Responsibility (OBR) predicted at the time of the Spring Budget that inflation this year would be 2.4% while average earnings would rise by slightly more than that: 2.6%.

Both inflation predictions are below the average of independent forecasters collated by HM Treasury, which predicted consumer price index (CPI) inflation of 3.0% this year.

They were expecting average earnings to grow by 2.5%, meaning household incomes would take a hit.

Mr Clegg said on BBC Radio 4 on Tuesday morning: "These aren't figures about what is going to happen - these are figures about what is happening."

But there is still forecasting going on and the outcome is uncertain.

More on this story

Related Internet Links

The BBC is not responsible for the content of external sites.