Sharp inflation rise deepens Britain’s pay squeeze

Britain’s pay squeeze is on course to deepen in April as a result of a sharp increase in inflation, the Resolution Foundation said in response to the latest inflation figures today.

The Resolution Foundation’s latest pay projection following today’s inflation figures indicates that real pay looks to have fallen by between -0.3% and -0.6% in the three months to April, continuing the squeeze on wages.

CPIH – the headline inflation measure – reached 2.6% in April. That’s its highest level since June 2013 and represents a doubling since October. This time last year the inflation rate was just 0.7%, helping to support growth in real wages at that time. CPI inflation is 2.7%. Both measures were pushed higher in April due to the timing of Easter compared with 2016, but they are expected to remain elevated over the remainder of the year.

With no sign yet of pay settlements responding to rising prices, real pay is on course to fall across 2017 as a whole.

Matt Whittaker, Chief Economist at the Resolution Foundation, said:

“Having hovered close to zero back in 2015, inflation has really picked up in 2017, doubling in the last six months alone and now at its highest level for almost four years.

“As a result, wages are falling again. Coming so soon after the deep post-crisis pay squeeze, this marks a new chapter in a truly terrible decade for pay – the worst in over two centuries.

“Additionally, higher inflation will also mean that the four-year freeze in working age benefits will really be starting to bite for millions of low and middle income families.

“With pay back in the spotlight and the election rapidly approaching, the parties must use their manifestos to show how they plan to help Britain turn the page on living standards and avoid a new surge in inequality.”