Pay squeeze 'deepens' as inflation hits 2.7%

16 May 17

The UK inflation rate hit 2.7% in April - up from 2.3% in March, the Office for National Statistics has said.

Its highest rate since September 2013 and above the Bank of England's 2% target.

This increase was mainly put down to higher air fares, which rose because of the later date of Easter this year compared with 2016.

Rising prices for clothing, vehicle excise duty and electricity also played a part in the pick-up in inflation. However, a fall in the price of petrol and diesel slightly offset this.

The Resolution Foundation think-tank has warned that the new figures indicating a “sharp increase” inflation would lead to Britain’s pay squeeze deepening.

According to the think-tank’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.  

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.”

Whittaker urged the political parties vying for power in the upcoming general election to outline plans about how they would help “turn the page on living standards and avoid a new surge in inequality”.

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