British workers will get the second-smallest pay rise in the European Union this year, as inflation wipes out almost all of the expected increase in earnings, a study has suggested.
While the outlook for wages remains gloomy across Europe, only Spain will fare worse than Britain when it comes to inflation-adjusted pay rises.
Earnings for UK-based staff are expected to rise by 2.9 per cent, yet the surging cost of living cuts this down to 0.1 per cent in real wage growth for the next two years, a survey by Willis Towers Watson has found. Spanish workers face stagnant real pay this year.
The figures are the latest sign of a “lost decade” for wages, as shifts in the labour market towards part-time and contract work drag on pay even as unemployment dwindles to its lowest rate in 40 years.
The outlook has worsened this year as inflation rocketed from near-zero to 2.6 per cent, the highest pace in four years, according to official figures released yesterday.
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“Coming so soon after the post-crisis pay squeeze, this latest freeze on wages . . . suggests the squeeze on pay and living standards is likely to intensify in the coming months,” Keith Coull, consultant in data services at Willis, said.
The weak data echoed the finding of the Office for National Statistics, which said last week that pay excluding bonuses had fallen by 0.5 per cent on a year ago during the three months to May. Growth in real pay has been slowing since 2015, having never recovered to the levels before the financial crisis.
The ONS said that average weekly wages were now about £458, based on 2015 prices, equivalent to £15 below the amount earned in March 2008, before the credit crunch began to make its presence felt.
Willis predicted that the rest of the EU would face its own struggles, with inflation erasing pay rises in the coming years. Its researchers said that real wage growth would slow to 0.9 per cent across the 28 present EU member states next year, down from 2.6 per cent in 2016.
Ireland is expected to be a bright spot, with pay rising by 1.1 per cent next year, while German workers can expect an increase of 1.5 per cent.
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Britain has fallen to the bottom of the EU’s growth league and trails behind most advanced economies, after announcing GDP growth of only 0.2 per cent for the first quarter.