LONDON — The amount the average Brit earns is dropping sharply as post-Brexit inflation pressures continue to squeeze, according to the latest data released by the Office for National Statistics on Wednesday.
“Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.1% including bonuses, and by 1.7% excluding bonuses, compared with a year earlier,” the ONS said.
In its monthly release of labour market data, the statistical authority confirmed that while wages grew by 2.1%, average earnings adjusted for inflation actually fell by 0.4%.
With inflation currently sitting at 2.9%, Wednesday’s wage numbers show that real wages are actually falling in the UK for a third consecutive month.
Prices are rising across the board thanks to the fall in the pound seen since last summer’s referendum, with food prices increasing particularly rapidly.
Here’s the ONS’ chart of wage growth:
The ONS’ troubling wage data comes just over a month after Bank of England Governor Mark Carney gave a stark warning about the state of the UK’s household finances as Brexit driven inflation squeezes incomes.
“The second [issue regarding wages] is that we have expected since the summer of last year that there would be a squeeze on real incomes around this time, and basically over the course of this year,” Carney said at a press conference following the release of the BoE’s Quarterly Inflation Report.
“In other words, that the wages people are getting are not going to be sufficient to compensate for the rises in consumer prices, prices in the shop.
“So this is going to be a more challenging time for British households over the course of this year, real income growth — to use our terminology — will be negative. To use theirs [layman’s] wages won’t keep up with prices for the goods and services they consume.”
Unemployment remains near record lows
Headline unemployment was 4.6% in the month, unmoved, and in line with the forecasts of economists. There were 50,000 fewer people unemployed than at the last reading, the ONS said.
“There were 1.53 million unemployed people (people not in work but seeking and available to work), 50,000 fewer than for November 2016 to January 2017 and 145,000 fewer than for a year earlier.”
Headline employment was also unchanged in May, remaining at 74.8%. That employment rate is the joint highest since comparable records began in 1971, the ONS said.
Since the Brexit vote, various economists and financial institutions have predicted that the UK’s unemployment rate will shoot up as a result of the vote to leave. Credit Suisse, for example, predicted an increase to 6.5% for the base rate, equivalent to roughly 500,000 jobs being lost. However, the last few months have seen the rate remain near its record low and Wednesday’s figures show the trend appears to be holding up.