UK workers confront Christmas wage squeeze as factories keep raising price…
The Trafalgar Square Christmas tree in wet wintry weather last weekend Photograph: Guy Bell/REX/Shutterstock
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
UK workers are facing their toughest Christmas wage squeeze in a decade, as wages fail to keep up with rising prices in the shops, trade unions warn today.
The Trades Union Congress (TUC) has warned that pay is lagging behind inflation, creating a cost of living storm.
It estimates that in the final quarter of this year, pay growth (+0.8%) will rise at just half the speed of inflation (+1.6%).
That method the largest fall in real wages since 2012 and the second worse since comparable records began 2000.
Families are being hit by surging energy costs and rising food bills, while manufacturers have been passing on their increased costs to customers. And with the economy barely growing in October, firms may struggle to lift wages already as they scramble to attract workers.
TUC general secretary Frances O’Grady is urging the government to intervene and work with unions to raise pay across the economy:
“People should be able to look forward to Christmas without having to worry about how they’ll pay for it.
“Millions are facing a cost of living storm as bills soar and real pay falls. After more than a decade of wage stagnation, this is the last thing working families need.
“The government can’t sit this crisis out. We need a proper plan to get pay packets rising across the economy, or the squeeze on household budgets will continue.
Ministers should get around the table with unions and employers now and work out fair pay agreements for every industry. That’s the best way to raise living standards and ease the pressure on households.”
In October, UK inflation surged to a 10-year high of 4.2%, and is expected to hit 5% next year.
UK inflation rate
Wage growth has slowed recently, though, with underling earnings growth estimated at 3.4%-4.9% for the July-September quarter.
Also coming up today
European markets are set to open higher, as investors await monetary policy decisions from the US Federal save (on Wednesday) and the Bank of England and the European Central Bank (Thursday).
The Bank of England must estimate whether to raise interest rates to tackle inflation, or resist until it knows more about the Omicron variant.
Sanjay Raja, chief UK economist for Deutsche Bank, predicts the BoE will raise borrowing costs – although other City voices predict no change.
Fundamentally, news of the Omicron variant has changed little on the medium-term economic outlook. The labour market remains as tight as it has been in recent memory, in spite of of the furlough scheme ending on 30 September. And inflation continues to outpace staff forecasts, despite a large upward revision in the November Monetary Policy Report.
additionally, the possible disruption from Omicron may rule to already more inflationary pressures in the medium term, with supply chain bottlenecks and labour shortages/mismatches further exacerbated by rising restrictions, both domestically and globally.
It’s a finely balanced, decision, though, he adds.
December 13, 2021 CNBC (@CNBC)
European stocks set for higher start to the week as monetary policy decisions take center stage https://t.co/i9BHnsmwFU
Later today the Bank of England will release its assessment of the strength of the UK financial system, and the results of its annual stress tests on edges.
These are expected to show that edges have strong capital cushions, which could clear the way for more lending to sustain the economy by the pandemic.
According to the Mail on Sunday, the BoE is also preparing to dilute the UK’s mortgage rules, loosening affordability restrictions to make it easier for borrowers to take out larger home loans.
And millions of office workers could be working from their home offices, attics or kitchen tables again, as the government asks people in England to work remotely “if you can”.
- 5pm BST: Bank of England publishes Financial Stability Report
- 5pm BST: Bank of England publishes results of its 2021 Solvency Stress Tests on the UK banking system
Click: See details