The Bank of England has warned of a drop in real-terms pay this year with average workers due to be left hundreds of pounds out of pocket.
Inflation will be higher than pay growth, the Bank’s Governor Mark Carney predicted – marking the first year since 2013 that workers have been hit by a real-terms cut in take-home pay. Salaries will be almost £1,000 lower than forecast before the Brexit vote, ministers have been warned, and £320 down on predictions just three months ago. Carney said the squeeze in real incomes was “not all because of Brexit”, because pay growth had been weak for several years. But he said wages were falling partly because firms are worried about trading prospects outside the EU, causing them to offer “more modest pay settlements”.
Even before the fresh squeeze to living standards, the decade was already on course to be the worst for pay growth for more than 200 years.
Matt Whittaker, chief economist at the Resolution Foundation, said, “The pay squeeze we’re currently experiencing is set to continue throughout the year, resulting in a renewed phase of living standards stagnation over the coming years.”
The Joseph Rowntree Foundation described the forecasts as “troubling news for millions of families who are working but already struggling to make ends meet”.