Living standards plunge in UK
By
Alice Summers
10 May 2017
Recent analysis of the British economy shows that living standards are declining in the wake of last June’s Brexit referendum. The latest figures show that economic growth has declined more than expected, inflation is rising, and real wages are falling.
According to the Office for National Statistics, UK gross domestic product (GDP) growth fell by more than anticipated to just 0.3 percent in the first quarter of 2017, down from 0.7 percent the previous quarter. The economic slowdown is expected to continue as higher inflation dampens consumer spending, upon which the UK economy relies.
The drastic fall in the pound since the Brexit referendum, combined with higher global oil prices, has lifted the inflation rate to 2.3 percent, above the Bank of England’s target of 2 percent. But while inflation is expected to continue climbing to an estimated 3 percent in the coming months, wage growth is set to fall.
The most recent figures show that workers are already worse off—real wages are declining, as the 2.3 percent inflation rate is outpacing wages growth, now running at just 1.9 percent compared to February of last year. Regular pay growth has not been weaker than the inflation rate since August 2014, when wages were growing by 1.2 percent while inflation stood at 1.5 percent.
Brexit has exacerbated a trend of weak or non-existent pay growth that started well before last year’s referendum. Even after adjusting for inflation, employees’ average earnings are still substantially below their levels before the 2008 financial crisis, according to a new report from the Institute for Fiscal Studies (IFS).
Jonathan Cribb, a senior IFS research economist, commented, “A period of this length over which earnings have…