Spending still a bit squeezy

29 September 2014

clothes shop The British consumer looks like they have another three years of spending squeezes.

The annual wage growth is likely to remain well below the 4.5%-to-5% rises seen before the financial crisis struck in 2008, according to a EY Item Club survey.

Median pay in real-terms is forecast to fall from £18,852 in 2008 to £17,827 by 2017, the survey suggests.

The Item club, a non-governmental forecaster that uses HM Treasury's model of the UK economy, believes that record numbers of people in work - currently 30.6 million - will act as a brake on wage rises.

Their report expects the gradual pace of consumer spending to be around 2% in the next two years, as opposed to the 3.7% it was last decade, pre-all the hassle.

Martin Beck, the EY Item Club's senior economic adviser said "Total household incomes have strengthened because more people are in work, but individuals do not have extra money in their pockets,"

"Real wages are being held back by strong growth in the supply of workers and the fact that firms are facing increased non-wage costs, such as new pension schemes," he added.

Mr Beck also believes the so-called "squeezed middle" - the charming name awarded to households containing neither highly-skilled nor low paid workers - will continue to see limited growth in disposable income as pay rises remain below the rate of inflation - currently 1.5% - and competition for jobs remains strong.

TOPICS:   Economy

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