U.K. workers suffer first pay squeeze since 2014

“The ‘lost decade’ for pay the past 10 years is only a taste of things to come,” he said.

Finance minister Philip Hammond said he expected a less prolonged squeeze this time because the rise in inflation would be transient.

One reason for analysts’ gloominess over pay is Britain’s stubbornly poor productivity. The ONS said output per hour declined 0.5 per cent from the fourth quarter, the biggest drop since the end of 2015.

Britain’s opposition Labour Party has made weak wage growth one of its main election themes. It has promised a higher minimum wage and the end to a cap on public sector pay.

May has said she will cap energy prices, breaking with the Conservative Party’s usually pro-market stance.

While wage growth is weak, there are other signs of continued strength in Britain’s labour market.

Unemployment fell to its lowest rate in more than four decades at 4.6 per cent. Economists polled by Reuters had expected the rate to remain at 4.7 per cent.

And the number of people in work rose by a robust 122,000, taking the employment rate to a new record of 74.8 per cent.

That kind of growth may not last, however. The number of people claiming unemployment benefits — historically a gauge of future unemployment — is now rising at the fastest quarterly rate since 2011, suggesting the jobless rate may now be near its low point.

Overall, the data is likely to bolster the BoE’s decision to keep interest rates just above zero. Despite inflation pushing past its 2 per cent target, the BoE says it has seen no sign of a permanent spike in prices fuelled by higher wages.

Employers plan to increase pay by just 1 per cent in the year ahead, the weakest rate since 2013, a survey showed earlier this week.