U.K. inflation rises for first time in 2018 as pay squeeze continues

Brits feeling pinch as pay growth lags behind rising prices
August 16, 2018


Britain's inflation rate picked up for the first time this year in July, leaving many British households still feeling squeezed by prices that are still rising at about the same pace as their salaries.

The more cynical U.K. commuter would say the annual hike in ticket prices is more regular than some of the rail services he and she is paying for.

Next year, it'll be 3.2 per cent — after a 3.6 per cent rise this year.

It's set according to the U.K.'s retail price index, but the more commonly used measure, the Consumer Price Index, is also on the rise.


"Inflation is ticking a little bit higher and that's not all that great considering what we had yesterday which was the average weekly earnings growth which disappointed slightly. That doesn't really bode all that well going forward. It suggests household debt is increasing and it suggests that the consumer is going to continue to be squeezed."

July CPI showed an annual rise of 2.5 per cent.

Some economists think it will fall again — others point to pressure in the pipeline with raw materials up nearly 11 per cent in the latest data.

On the plus side: the U.K. jobs market, at a 43-year-low — even as pay growth, at 2.4 per cent, lags inflation.

And, with sterling now in its longest losing streak since the depths of the financial crisis in 2008, spending power is weakening too.


"You've got the sterling valuation which continues to fall away and not just get to fuel the rise in inflation going forward and again that's going to continue to squeeze U.K. real wages."

That's not a problem for some of Britain's bosses, though.

A new survey shows that among chief execs of FTSE 100 companies, pay was up 23 per cent in 2017, putting their yearly income on track to an average 5.7 million pounds.

— David Pollard, Reuters