UK recession warning: Wages fall at fastest rate for a decade as CBI demands action

Britons warned of damaging impact of rising inflation

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Data released today shows that while inflation is continuing to rise, wages have fallen at the fastest rate for a decade. This has led to calls for the Government to take immediate action to prevent an inflation-driven recession.

“5.72 million public sector workers have seen a massive effective pay cut at a time of runaway price rises – with pay up just 1.5 percent while inflation was up 6.5 percent.”

This gap between pay rises in the public and private sector is among the biggest ONS has ever recorded.

Ms Coles added: “Public sector pay growth hasn’t dropped this low for almost five years, so we’re seeing miserable pay growth for many of those who were at the sharp end of the coronavirus crisis.

“While many companies have been increasing pay to help employees keep their heads above water, the government is determined to keep a lid on public sector pay rises.

The Confederation for Business Industry (CBI) is calling for the Government to take “vital action” to prevent an inflation-driven recession after the data showed the economy contracted by 0.3 percent in April.

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The CBI downgraded its growth outlook to 3.7 percent for this year, from 5.1 percent.

Chief economist, Rain Newton-Smith, said: “This is a tough set of statistics to stomach.

“War in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – has proven to be a toxic recipe for UK growth.”

The data is compounded by recent warnings that the economy faces a period of low growth.

While some companies have been giving employees a pay rise to help ease the financial pain, experts claim it’s not enough to keep up with soaring prices.

Alice Haine, personal finance analyst at Bestinvest, said: “In April, real wages declined on average by 2.2 percent compared to a year ago.

“It means the spending power of households is now severely compromised and with inflation expected to surge to 10 percent or higher in the fourth quarter – when Ofgem’s energy price cap increases to £2,800 – the situation will only get worse.

“For households grappling with higher food, fuel and energy bills along with the rise in the National Insurance tax, asking for a pay rise now may not be enough to ease the strain of the cost-of-living crunch.”

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Experts fear the worst is yet to come.

The colder months will mean more people are forced to make the choice between eating and heating.

Many experts recommend reducing spending and debt as much as possible now before energy bills soar again.

The ONS employment and wage data for February to April 2022 can be found at UK Labour Market: June 2022 – Office for National Statistics.

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