“Britons are getting poorer,” said the TUC’s general secretary, Frances O’Grady. “Having just lived through the longest wage squeeze since Victorian times, their living standards are in freefall again. The government cannot sit on its hands and watch the crisis unfold. It needs to help create better-paid jobs in the parts of Britain that need them most. And lift the unfair pay restrictions on public sector workers.”
Rising prices in the wake of the Brexit vote have put the tightest squeeze on household incomes for more than five years, according to official figures on Britons’ economic well-being. In the opening three months of 2017, real household disposable income per head dropped 2% from the previous year. It was the steepest decline since the end of 2011 and driven by increasing prices of goods and services, the Office for National Statistics (ONS) said.
Households have been hit by a double whammy of slow wage growth and rising inflation. The pound’s weakness since the EU referendum last summer has made imports to the UK more expensive and firms are passing their higher costs on to consumers. Inflation hit a four-year high of 2.9% on the latest measure. That has meant a return to wages falling in real terms, which adjusts for the effects of inflation. Workers had already suffered years of declining real wages in the wake of the financial crisis.
Dan Tomlinson, a researcher at the Resolution Foundation thinktank. “While no one expects it to be as bad as the last one, the fact that the fall in household incomes at the start of 2017 was the biggest in over five years is a huge cause for concern,” he said.
Laith Khalaf, senior analyst at the financial firm Hargreaves Lansdown, said UK consumers “could be sleepwalking into financial difficulties”.
“The pressure is ratcheting up on UK households, but consumers don’t seem to be fully aware of the crunch that is under way,” he said. “Despite weak wage growth and rising prices, consumers are continuing to spend by racking up more debt. That, of course, helps keep the wheels of the economy turning, but stores up problems for the future.”