UK workers are facing their toughest Christmas wage squeeze in a decade, as wages fail to keep up with rising prices in the shops, trade unions warn today.
The Trades Union Congress has warned that pay is lagging behind inflation, creating a cost of living storm.
It estimates that in the final quarter of this year, pay growth will rise at just half the speed of inflation .
That means the largest fall in real wages since 2012 and the second worse since comparable records began 2000.
Families are being hit by surging energy costs and rising food bills, while manufacturers have been passing on their increased costs to customers. And with the economy barely growing in October, firms may struggle to lift wages even as they scramble to attract workers.
People should be able to look forward to Christmas without having to worry about how they’ll pay for it.
Millions are facing a cost of living storm as bills soar and real pay falls. After more than a decade of wage stagnation, this is the last thing working families need.
The government can’t sit this crisis out. We need a proper plan to get pay packets rising across the economy, or the squeeze on household budgets will continue.
Ministers should get around the table with unions and employers now and work out fair pay agreements for every industry. That’s the best way to boost living standards and ease the pressure on households.
In October, UK inflation surged to a 10-year high of 4.2%, and is expected to hit 5% next year.
Wage growth has slowed recently, though, with underling earnings growth estimated at 3.4%-4.9% for the July-September quarter.
European markets are set to open higher, as investors await monetary policy decisions from the US Federal Reserve and the Bank of England and the European Central Bank.
The Bank of England must assess whether to raise interest rates to tackle inflation, or resist until it knows more about the Omicron variant.
Sanjay Raja, chief UK economist for Deutsche Bank, predicts the BoE will raise borrowing costs – although other City voices predict no change.
Fundamentally, news of the Omicron variant has changed little on the medium-term economic outlook. The labour market remains as tight as it has been in recent memory, in spite of the furlough scheme ending on 30 September. And inflation continues to outpace staff forecasts, despite a sizeable upward revision in the November Monetary Policy Report.
Moreover, the potential disruption from Omicron may lead to even more inflationary pressures in the medium term, with supply chain bottlenecks and labour shortages/mismatches further exacerbated by rising restrictions, both domestically and globally.
Later today the Bank of England will release its assessment of the strength of the UK financial system, and the results of its annual stress tests on banks.
These are expected to show that banks have strong capital cushions, which could clear the way for more lending to support the economy through the pandemic.
According to the Mail on Sunday, the BoE is also preparing to dilute the UK’s mortgage rules, loosening affordability restrictions to make it easier for borrowers to take out larger home loans.
And millions of office workers could be working from their home offices, attics or kitchen tables again, as the government asks people in England to work remotely if you can.