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Brits face the ‘biggest wages drop since 2009’ as Bank of England fails to grip inflation


Britons are facing the biggest fall in wages since 2009, official figures have shown. After CPIH inflation (9.1 percent), real pay including bonuses fell three percent while regular pay excluding bonuses fell 2.3 percent. CPIH extends CPI to include a measure of housing costs.

The figures released today (April 18) in the Office for National Statistics’ latest labour market report also show one of the biggest falls in wages since records began in 2001.

Jack Kennedy, UK and Ireland Economist at global job site Indeed, told Express.co.uk: “The squeeze on workers’ pay packets shows no sign of abating amid high inflation.

“Despite total wage growth running at almost six percent year-on-year in February, after accounting for soaring prices it was down three percent, the biggest drop since 2009.

“We’re seeing the unfortunate combination of wage growth being high enough in nominal terms to trouble the Bank of England into considering further interest rate rises, yet still insufficient to prevent households from experiencing a painful squeeze on their purchasing power, as the cost of living rockets.”

Unemployment rose to 3.8 percent in the three months to February, up from 3.7 percent in the previous quarter.

The economic inactivity rate has also dropped, driven by students. It decreased by 0.4 percentage points on the quarter to 21.1 percent in December 2022 to February 2023, according to the ONS.

In January to March 2023, the estimated number of vacancies fell by 47,000 on the quarter to 1,105,000.

Vacancies fell for the ninth consecutive quarter, reflecting uncertainty across industries with ONS survey respondents continuing to cite economic pressures as a factor in holding back on recruitment.

But the figures also showed a rise in employment to 75.8 percent in the three months to February from 75.7 percent in the previous three months.

It suggests more people have returned to the jobs market in the face of the cost-of-living crisis. Today’s pay figures also piles more pressure on the Bank of England as it tries to tame inflation.

Darren Morgan, Director of Economic Statistics at the ONS, said: “With the number of people neither working nor looking for a job down again, there were rises in both those in work and those actively looking for a job.

“However, while the group outside the labour market – termed ‘economically inactive’ – fell, the number among them who were long-term sick rose to a new record high.

“Job vacancies have fallen again but remain at very high levels.

“Meanwhile, pay continues to grow more slowly than prices, so earnings are still falling in real terms, although the gap between public and private sector earnings growth continues to narrow.”

Chancellor Jeremy Hunt said in a statement: “While unemployment remains close to historic lows, rising prices continue to eat into pay cheques which is why halving inflation this year is one of our top economic priorities.

“To help families in the meantime, we are making work pay with a record increase in the National Living Wage, while providing cost of living support worth an average of £3,300 per household this year and last, funded through windfall taxes on energy profits.”

Rachel Reeves, Labour’s shadow chancellor, said: “Our country has enormous potential. We should be leading in the industries of the future and creating good jobs across Britain – but the Tories continue to hold us back.

“Thirteen years of the Tories and all we have is a gaping hole where their plan for growth should be and a cost-of-living crisis that continues to damage family finances.

“Their lack of ambition for Britain is leaving real wages down, families worse off, hundreds of thousands fewer people in work and our economy lagging.”

Employment minister Guy Opperman said the latest jobs figures are “encouraging”.

He said: “I remain focused on supporting those on the lowest incomes to progress in work and build a steady and sustainable future.”



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