UK pay squeeze on millions of families' living standards tightens but employment at record high

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A six-month squeeze on the living standards of millions of households tightened in the summer, official figures revealed today.

They showed average wages dropped by 0.5 per cent in July, once inflation is taken into account, compared to a year earlier.

The fall was bigger than the 0.4 per cent decline in the previous two months and experts warned it is set to get worse after CPI inflation hit 2.9 per cent in August.

The cost of living increase for many families is still higher than the wage increases that police and prison officers are set to get after the public sector pay cap was lifted.

The gloomy news, though, was offset by employment hitting another record high despite Brexit uncertainty.

The number of people in work climbed by 181,000 to 32.13 million between May and July, according to the Office for National Statistics. The employment rate also rose by 0.5 per cent to a record high of 75.3 per cent.

In London, employment increased by 88,000 to 4.67 million, compared to the previous quarter, while unemployment was down 36,000 to 254,000.

Employment has increased in London, but the fall in the pound’s value has hit people’s disposable income. (Getty Images)

However, millions of people are finding they have less money in their pocket as inflation, fuelled by the drop in Sterling’s value after last June’s Brexit vote, continued the trend since February of outstripping wage increases, excluding bonuses.

Liberal Democrat leader Sir Vince Cable said: “The Government must urgently change course from an extreme Brexit that is set to leave Britain permanently poorer.”

Experts believe the weak wages data will prevent members of the Bank of England’s monetary policy committee putting up interest rates.

Andrew Wishart, UK economist at Capital Economics, said: “With inflation reaching 2.9 per cent in August, the squeeze on households’ real incomes probably intensified.

“That would make the risk of a sharper downturn in consumer spending the overwhelming concern to the majority of the MPC members.”

The jobs market, though, continued to shine, with unemployment tumbling by 75,000 to a 12-year low of 1.46 million. The unemployment rate dropped over the period, easing back by 0.2 per cent to 4.3 per cent — the lowest level since 1975.

MPs were today debating pay restrictions in the NHS, with Labour warning they were leading to recruitment problems for nurses and other key staff.

With the one per cent pay cap expected to be lifted for nurses, teachers and some other public sector workers, Justice Secretary David Lidington accepted the increases for police and prison officers of two per cent or less were “less, certainly than the workers would want”.

But he added: “Any responsible Government has to strike a balance between what we want to do to recognise the dedication, the professionalism of public sector workers and what tax payers are able to afford.”

Meanwhile, union chiefs are threatening a wave of illegal strikes with Unite boss Len McCluskey even comparing himself to Nelson Mandela and Gandhi in their stand against authority.

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