UK inflation erodes wages in July, but boardroom pay spikes
LONDON: British inflation accelerated last month on high transport costs, hitting average workers’ purchasing power – but boardroom pay has surged, data showed.
The Consumer Prices Index (CPI) 12-month rate picked up speed to 2.5 per cent in July after 2.4 per cent in June, the Office for National Statistics (ONS) said in a statement.
The news came two weeks after the Bank of England (BoE) hiked interest rates by a quarter-point to 0.75 per cent to tame high inflation.
The CPI reading, which met expectations, was the first increase since November 2017.
Separate ONS data had showed Tuesday that average earnings increased by 2.4 per cent in the year to June. But that was a ninemonth low and followed 2.5 per cent for the previous month.
“Prices were driven higher last month due in part to a rise in transport costs, in turn partly due to a rise in the cost of motor fuels,” said Laura Suter, analyst at stockbroker AJ Bell.
She added: “The UK workforce is now failing to make more than the rise in prices each month.
“This is squeezing households and will in turn have a knock-on effect on consumer spending and the UK’s economic growth.”
The CPI has now held above the BoE’s official 2.0-per cent target since February 2017.
Since Britain’s shock EU exit referendum in June 2016, Brexit uncertainty has weighed on the pound and pushed up the cost of imported goods – thus feeding higher inflation.
“The CPI inflation rate has now been above the BoE’s target rate of 2.0 per cent for 18 consecutive months,” said economist Alastair Neame at the Centre for Business and Economics Research (CEBR).
“This will provide some justification of the BoE who voted unanimously on August 2 to raise interest rates to 0.75 per cent – only the second rate rise in over nine years.”
But he warned: “Workers have yet to see substantial gains in their pay.”
Separately, a survey showed that the average annual pay packet of Britain’s top executives jumped 23 per cent in 2017, and was 160 times the average fulltime wage.
The study, by worker pressure groups High Pay Centre and the Chartered Institute of Personnel and Development (CIPD), found that the average chief executive of a FTSE 100 company was almost 5.7 million pounds (US$7.3 million, 6.4 million euros) in the 2017 financial year, up from 4.6 million pounds in 2016.
However, the research was skewed by exceptional massive payouts in excess of £40 million each for the chief executives of housebuilder Persimmon and turnaround specialist Melrose Industries.
From next year, companies listed in Britain will be required to reveal the gap between the salaries of their chief executives and employees.
All public companies with more than 250 employees will have to disclose and explain every year their ‘pay ratios’ under legislation planned to come into effect from January 2019. — AFP