Employment reached record high on eve of referendum result

Britain facing a major pay challenge in wake of post-referendum economic uncertainty

Britain hit record employment on the eve of the referendum result, but its recent poor performance on pay is a major concern with earnings growth expected to slow, the Resolution Foundation said today (Wednesday) responding to the latest ONS labour market figures.

The UK employment rate hit a new record high of 74.5 per cent in the three months to June. The claimant count also fell in July, suggesting that the Brexit vote did not prompt immediate employment decisions within firms.

Non-UK nationals accounted for 39 per cent of net jobs growth over the last 12 months, underlining the big role migration plays in Britain’s high employment economy.

Real average earnings growth was 1.9 per cent in the three months to June and has now been below 2 per cent for eight months, despite historically low inflation. With inflation now rising and expected to climb far more steeply in the coming months, Britain’s poor performance on pay is a major cause for concern, says the Foundation.

It notes that productivity grew by 0.3 per cent over the last year, well below its pre-crisis average of 2.3 per cent. This will need to improve substantially if Britain is to avoid another pay squeeze.

Laura Gardiner, Senior Policy Analyst at the Resolution Foundation, said:

“The referendum took place against a backdrop of record employment. While more recent economic data has yet to come though, today’s figures suggest it hasn’t prompted any immediate employment decisions among firms.

“However Britain’s poor performance on pay is a major concern. Tackling Britain’s terrible productivity record – the root cause of such underwhelming pay growth – must be a priority if another painful pay squeeze is to be avoided.

“Today’s figures also underline the big role migration plays in jobs growth across the UK at present. While claims that this is holding back the pay of British workers are often wildly overstated, migration has led to a small drag on wages among some low-paid professions.

“Government efforts to reduce migration must be aligned with a wider industrial strategy to support low-paying migrant-reliant sectors such as caring and food manufacturing.”