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The “Brexit squeeze” will last for the rest of the year, City experts warned today, as official figures revealed another fall in living standards for millions of families.
Critics of the decision to leave the European Union said it risked leaving Britain “permanently poorer”, as wages rose at a slower pace than inflation for the fifth month on the trot in June.
Wages went up by 2.1 per cent in the April to June quarter, compared with the 2.6 per cent rise in shop prices revealed in yesterday’s inflation figures.
City economists said there was no sign of the squeeze abating this year. Maike Currie, director for personal investing at Fidelity International, said: “Unfortunately the outlook doesn’t look much brighter for Britain’s workers.”
The lag in wages means workers are 0.5 per cent worse off than in June 2016, the month of the referendum on Britain’s membership of the EU. The vote to leave triggered a slump in the value of the pound which has been followed by a surge in the rate of inflation.
A weaker pound means imported goods such as wine and clothes become more expensive.
The latest figures follow the announcement yesterday that rail fares linked to inflation, such as commuter season tickets, are to rise by 3.6 per cent in the New Year.
The data from the Office for National Statistics shows that real earnings have fallen for all five months since February. After allowing for inflation, the average weekly wage excluding bonuses in Britain was £459 in June, compared with £461 in June 2016.
There was better news on unemployment, with the jobless rate falling to a 42-year low. The shadow work and pensions secretary, Debbie Abrahams, said: “Labour welcomes the overall increase in employment but we are deeply concerned that millions have faced a real-terms pay cut under this government.
“With wages continuing to fall in real terms, Tory cuts to in-work support, and rising prices, many households and families are worse off under this government.
“The Government has failed to close the employment gap faced by women, disabled people and ethnic minority groups, who are still less likely to be in work, and has failed to tackle regional inequalities in the labour market.”
Liberal Democrat MP Tom Brake said: “People are again seeing their pay squeezed by Brexit inflation. Brexiteers promised a land of milk and honey, but the reality is falling wages and rising prices. We need to stand up against an extreme Brexit that will leave Britain permanently poorer.”
City economists warned that the pain for consumers would affect the wider economy.
Howard Archer, chief economic adviser to forecaster the EY Item Club, said: “Worryingly for consumers, higher employment is still not translating into higher pay as inflation hovers close to three per cent. Thus the squeeze on consumers remains appreciable, with obvious negative implications for personal expenditure.”
Ms Currie said: “The latest report from the Chartered Institute of Personnel and Development says employers are predicting an average of one per cent increase in wages in the next year, while the Bank of England has pointed out that uncertainty over the economic outlook may be affecting companies’ willingness to raise pay — it expects regular pay growth to remain subdued for the rest of 2017.”
The minister for employment, Damian Hinds, said: “These statistics show that record levels of people are in work across the country and earning a wage, which is great news.
“Over the past year the rise in employment has been overwhelmingly driven by permanent and full-time jobs, as employers continue to invest in Britain’s strong economy.
“The task now is to build on this success through Jobcentre Plus and our employment programmes so that everybody can benefit from the opportunities being created.”
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