UK households are continuing to face financial strain, with living costs rising faster than wages despite a slight improvement in disposable income, reveals new data from Asda Income Tracker.

The supermarket giant found that in September, the average UK household had £254 in weekly discretionary income, up £2.81 year-on-year, the first rise since December 2024. However, with inflation holding at 3.8%, the joint-highest level since January, budgets remain under pressure.

According to the report, 60% of lower-to-middle-income households saw their discretionary income fall as essential costs outpaced post-tax earnings. The lowest-income households recorded a shortfall of £73 per week, leaving many unable to cover basic expenses.

The data also shows that regional disparities persisted, with seven out of twelve UK regions worse off than a year ago.

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The West Midlands saw the sharpest decline, with weekly discretionary income falling £7.70 to £193, while London retained the highest at £334 per week. Northern Ireland remained the lowest at £130.

The Tracker also found that annual gross income growth slowed across most regions, particularly in manufacturing areas such as the West Midlands, Yorkshire and the Humber, and the North West, impacted by US export tariffs.

Commenting on the findings, Sam Miley, head of forecasting and thought leadership at Cebr, said:“While inflation has held at nearly twice the Bank of England’s target, certain essential spending categories such as food are starting to see a slowdown in price rises, which will be welcomed by consumers.

“The upcoming November Budget has also hinted at further support for household energy bills, which could be an additional cause for optimism heading into the fourth quarter of 2025. That said, with the UK labour market cooling, the risk of a contraction heading into the new year cannot be ignored.”