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Lack of real wage growth puts business between a rock and a hard place

18 Jul 2017

financial markets data on digital screenResponding to official inflation figures today, showing Consumer Prices Index was 2.6% in June 2017, down from 2.9% in May 2017, Stephen Martin, Director General of the Institute of Directors, said:

“While today’s figures show a pause in the increase in the cost of living, annual earnings growth remains sluggish. The recent fall in global oil prices is helping motorists by reducing the cost of motoring. Food inflation, however, is continuing to eek slowly upward in response to sterling’s collapse. Consumer spending helped keep the economy expanding strongly in the six months after the Brexit vote but the release of today’s inflation data indicates that living standards are now being squeezed.

“Business finds itself between a rock and a hard place, at risk from a slowdown in consumer demand, but not in a position to give inflation-beating pay rises. Companies are feeling the effects of increases in costs from policies like the apprenticeship levy and pensions auto-enrolment, but are yet to see any offsetting measures from government, such as increase in investment allowances, while the money to help small businesses adjust to business rate rises isn’t flowing through yet.

“Meanwhile, investment decisions are being put on hold while business leaders await news of how the Brexit process will happen. The negotiations may just be beginning in earnest, but business will need to start planning soon for what happens immediately after 29 March 2019.”

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