British workers experience biggest wage drop in two decades due to inflation

Real wages — inflation-adjusted wages for workers — fell 2.8% between March and May compared to the same period last year, according to data released Tuesday by the National Statistics Office.

This is the fastest decline since the ONS began keeping records in 2001.

For months, rising global energy and commodity prices, exacerbated by Russia’s invasion of Ukraine, have fueled global inflation. The world’s fifth largest economy has become one of the hardest hit among the richest countries in the world.

UK consumer prices hit a 40-year high of 9.1% in May, the highest among the leading G7 economies, and are forecast to top 11% later this year despite a series of interest rate hikes.

And households are feeling the strain. Stunning energy and groceries bills put Britons in the worst position cost of living crisis in decades. The Bank of England predicts that household disposable incomes will suffer the second-biggest fall this year since registration began in 1964.

Grocery bill inflation was nearly 10% in the four weeks ending July 10, according to research firm Kantar data released Tuesday. This means Britons can expect to spend an extra £454 ($545) this year on food and essentials.

Energy bills, which rose 54% in April, is valued at £3,000 ($3,603) a year for millions of households since October, according to research firm Cornwall Insight. It is then that the government then adjusts the price ceiling, which limits the amount suppliers can charge customers per unit of energy.

Boris Johnson’s government has promised £400 ($480) per family grants to help millions of people struggling to pay their electricity bills. He also bowed to pressure last month and unveiled a £5 billion ($6 billion) tax on oil and gas windfalls.

High inflation, coupled with disruptive Brexit policies, has undermined the country’s growth. Last month, the Organization for Economic Co-operation and Development predicted that the UK economy was heading towards stagnation with zero GDP growth projected for 2023. This will be the worst result in the G7 next year.

The pound sterling has also fallen this year, shedding 11% of its value against the US dollar, which is likely to make it more expensive to import goods.

But there is one bright spot. Preliminary data from the ONS showed that recruitment continued at a rapid pace last month, with the number of people on payroll up 3% year-over-year.

Mark Thompson contributed reporting.

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