Workers in the UK experienced a modest 0.4% increase in pay when factoring in inflation during the three months leading up to May, as confirmed by the Office for National Statistics. This rise in real terms pay, up from 0.3% in the previous quarter, underscores the continued financial pressure faced by many households.
Newly appointed Prime Minister Andy Burnham announced plans to address the cost of living crisis, starting by eliminating VAT on electricity bills. This move is expected to reduce the average bill by £45. The ONS reported a 3.4% increase in regular pay excluding bonuses before inflation in the same period, signaling a notable slowdown compared to the previous year.
Despite the easing of inflation, which dropped to 2.8% in May, economic concerns persist. Susannah Streeter, Chief Investment Strategist at Wealth Club, warned of potential cost escalations due to geopolitical tensions in the Middle East impacting fuel, transport, and business expenses. Market expectations now include at least two anticipated interest rate hikes, further affecting affordability and consumer behavior.
Mr. Burnham’s tenure coincides with a challenging job market landscape, with the UK’s unemployment rate holding steady at 4.9% in May. Additionally, the number of job vacancies decreased slightly to 712,000, though still higher than earlier in the year. The employment rate for individuals aged 16 to 64 years saw a marginal decrease compared to the previous year but a slight increase from the prior quarter.