UK workers see biggest fall in living standards in 8 years

[LONDON] UK living standards fell at the fastest pace in more than 8 years in February as wages lagged further behind the rate of inflation. Average earnings excluding bonuses rose 4.1 per cent from a year earlier, the Office for National Statistics said Tuesday (Apr 12). Adjusted for prices over the same period, however, they dropped 1.3 per cent, the most since 2013.

The figures show how the soaring cost of living is depriving Britons of the benefits of a strong labour market. Unemployment fell to 3.8 per cent in the 3 months through February, the lowest since the end of 2019, while vacancies are at record levels amid an acute shortage of workers.

Still, the data also suggested that stellar growth may be slowing, with employers adding just 35,000 payrolls in March, well below estimates and the lowest since February 2021.

The squeeze on incomes is expected to hurt demand and growth for the rest of the year. More pain lies ahead for households, with recent tax rises and energy bill increases threatening to deliver the biggest blow to British living standards on record.

The possibility of double-digit inflation for the first time in 4 decades is piling pressure on the government to do more to help hard-pressed households, after under-fire Chancellor Rishi Sunak's aid package was deemed inadequate by economists and charities alike. The Bank of England, meanwhile is on course to unveil its fourth straight rate hike in May to help contain longer-term price pressures.

The ONS data showed 3-month wage gains picked up to 4 per cent, leading to a real-terms drop of 1 per cent. BLOOMBERG