UK drops down EU living standards league table

Britain has slipped two places down Europe's league table of living standards, falling to sixth after being overtaken by Austria and Germany, the European Union's statistical body said.

With high inflation eroding spending power in Britain, Eurostat said actual individual consumption (AIC) per head dropped from 120% of the EU average in 2010 to 118% in 2011.

Living standards in the UK have been hit since the onset of recession in 2008 by higher unemployment, higher taxes, and failure of wages to keep pace with prices.

Bank of England governor Sir Mervyn King warned at the end of 2011 that households suffered the biggest squeeze since the Great Depression of the 1930s.

The Eurostat figures coincided with a report from the Department for Communities and Local Government showing that a decade of progress in tackling deprivation was reversed in 2009 – the year when the slump was the deepest.

In his decade as chancellor, Gordon Brown made a priority of tackling poverty and the DCLG data shows income deprivation fell on average between 1999 and 2008. The most deprived communities in Britain saw the biggest drop in deprivation but then suffered from the biggest increases in 2009.

The DCLG report divided Britain's local communities into tenths and ranked them by the level of deprivation. It found the downturn of 2008-09 was so severe that only the two poorest deciles had lower levels of deprivation in 2009 than they had in 1999. Hackney, Knowsley, Manchester and Lambeth featured in the list of the 10 most deprived authorities in every year from 1999 to 2009.

Eurostat, which looks at living standards for countries inside and outside the EU, said the top five countries for living standards in 2011 were Luxembourg (140% of the EU average), Norway (135%), Switzerland (130%), Germany (120%) and Austria (119%).

Inside the EU living standards were lowest in Bulgaria (45% of the EU average) and Romania (47%), although Europe's debt crisis has taken a heavy toll of AIC per head in Greece, where it has fallen from 104% of the EU average in 2009 to 91% in 2011.

Eurostat reported smaller declines in living standards in the other countries at the centre of the sovereign debt storm – Ireland, Spain and Portugal.

AIC per head is often used as an alternative to gross domestic product as a way of measuring living standards. It includes the services households consume, such as benefits in kind including health and education.

Using GDP per head as a yardstick, the UK was 10th in the EU table of living standards in 2011, unchanged from the previous year. Luxembourg was comfortably the best off EU country on this measure, with GDP per head at 271% of the average, compared with 109% in Britain.

Eurostat's comparison of living costs showed the UK was the 14th most expensive country in the EU in 2011, up from 15th most expensive in 2010. Prices were 3% above the EU average.