British purchasing power set to stagnate in 2018: study

[LONDON] Britons' purchasing power, which took a hit this year against the backdrop of Brexit, looks set to stagnate in 2018, according to a new study released on Wednesday.

Following what was a "tough year for living standards" in 2017... the prospects for a "meaningful pay recovery" are "still out of sight", said Torsten Bell, head of the Resolution Foundation, a London-based think tank.

Since Britain voted to leave the European Union in June 2016, a drop in sterling - making imported goods more expensive - has pushed inflation up to more than 3.0 per cent.

And while unemployment is currently at its lowest level since 1975, low productivity has prevented wages from keeping pace with inflation.

The think tank noted that stagnant pay packets next year actually represented an improvement over 2017, when real wages fell.

It suggested that the effect of the falling pound could ease off in the coming months, causing inflation to slow.

But the study predicted that the squeeze on purchasing power was likely to worsen before it improved.

For the moment, the high rate of inflation in Britain still appears to be hitting post-Christmas retail sales.

The number of people shopping on Boxing Day fell sharply compared to last year, according to retail performance analysts, Springboard.

AFP