By Marcus Leach
A new report published by Deloitte shows that UK consumers face a drop in disposable income of £780 in 2011.
The report highlights government tax rises, spending cuts and inflation being pushed up by higher commodity prices as the main factors behind the drop in disposable income.
According to Deloitte households' disposable incomes will not reach their previous high of 2009 again until 2015, with real earnings "all but certain" to fall for the fourth year in a row - for the first time since the 1870s.
Real incomes will, according to the report, only start to rise again at the end of 2012, while inflation is heading "possibly above 5%".
Deloitte's chief economic adviser Roger Bootle believes consumers have no choice but to cut back on their spending, with predictions seeing spending dropping by 1% in 2011 and 0.5% in 2012.
"Given high debt and given all the other pressures on consumers and given the state of the housing market, I think even a small increase in interest rates could prove to be very dangerous," Bootle told the BBC.