UK workers feel pinch on slower pay rises and inflation

British workers are suffering from an increasingly tight squeeze in their spending power, figures showed on Wednesday, adding to concern about a slowdown in the world’s fifth-biggest economy and to the challenges for a weakened Prime Minister Theresa May.

A fall of 0.4% in wage growth in the three months to April, when adjusted for inflation, represented the biggest loss of real earnings for households since 2014, even as a joint record-high proportion of people in Britain are in work.

Britain’s economy withstood the shock of 2016’s Brexit, prompting some supporters of Brexit to say fears of a hit to the economy were overblown.

But growth slowed sharply in early 2017, as consumers were hit by rising inflation caused by the fall in the value of the pound after the referendum.

Credit-card firm Visa said on Monday that it saw the first annual fall in spending by consumers in nearly four years in May. Other rich countries are also struggling with the phenomenon of low unemployment but weak wages.

But the challenge looks particularly acute for May and her minority government, which is still trying to do a deal with a small Northern Irish party that will give her enough votes in parliament to pass legislation. The opposition Labour Party won more votes than expected in last week’s election with its promises of measures such as the end to a 1% cap on pay hikes for public-sector workers and a higher minimum wage.

“Public sector workers have not had a proper pay rise since 2011,” said Dave Prentis, head of Unison, a union which represents the sector. “The public sector pay cap must go.”

Chancellor of the Exchequer Philip Hammond delivers his first speech since the election on Thursday.