The average UK family had £6 a week less disposable income in May than the same month a year earlier, according to the Asda Income Tracker.

As a result, the average UK household had £210 a week of discretionary income in May, down from £216 last year. The cost of living continued to rise, with a 3.4% rise in inflation, down from 3.7% in April.

Petrol costs remain a concern, with a 10% year on year increase in prices in May.

Today’s emergency budget is likely to signal tougher times ahead, with almost 85% of respondents saying a rise in VAT would have the biggest impact on their family finances, and 60% saying a rise in National Insurance would also be difficult.

Charles Davis, the economist at Cebr who compiles the report for Asda, said: “Annual growth in average family spending power has been in negative territory for five months in succession. Households are facing the headwinds of above target levels of inflation and muted growth in regular pay. Looking forward inflation is likely to fall back over the course of the year, but the fiscal tightening announced in the budget means the labour market outlook is still weak. Hence, the outlook for disposable income growth remains challenging”

Andy Clarke, Asda chief executive, said: “This month’s Asda Income Tracker really shows how tough customers are finding it out there, even before the emergency budget. There are clearly challenges ahead for ordinary families as the nation addresses the deficit.

“Nevertheless, the best businesses will view this as a call to action, not a time to wallow, whinge, or wonder when the recovery will appear, but a time to do what British business does best – find ingenious, sustainable ways to reduce costs so whatever tough measures are on the way, customers don’t notice a thing. Here at Asda, we’re ready to help customers save money everyday, by working even harder to reduce costs.”

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