UK workers suffer hit to spending power
london — British workers are suffering from an increasingly tight squeeze in their spending power, data showed on Wednesday, adding to concerns 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 per cent 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 last year’s Brexit in 2016, 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 felt the pinch of rising inflation caused by the fall in the value of the pound after the referendum.
Credit card firm Visa said on Monday it saw the first annual fall in spending by consumers in nearly four years in May.
Other rich countries around the world 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 putting together a deal with a small Northern Irish party that will give her enough votes in parliament to pass legislation.
The opposition Labour Party won many more votes than expected in last week’s election with its promises of measures such as the end to a one per cent cap on pay increases for public sector workers and a higher minimum wage.
“Public sector workers have not had a proper pay rise since 2011,” Dave Prentis, head of Unison, a union which represents the sector, said. “The public sector pay cap must go.”
Finance minister Philip Hammond is due to deliver his first speech since the election on Thursday.
Ratings agency Moody’s has said the government might now slow Britain’s push to lower the budget deficit, having already pushed back the target date for a surplus to the mid-2020s. — Reuters