BCC: UK wage growth undermined by poor productivity
Commenting on the labour market figures for July 2018, published today by the ONS, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:
“Robust jobs growth, together with another drop-in unemployment, is further evidence of the continued strength of the UK labour market.
“The second successive slowdown in regular pay growth is disappointing. This means that earnings growth in real terms remains in positive territory by just a small margin and so is unlikely to provide much of a boost to consumer spending power. UK wage growth continues to be undermined by poor productivity and the marked impact of underemployment. The failure to tackle the escalating burden of upfront business costs is also weighing on the extent to which pay is able to rise.
“The increase in the number of job vacancies to a new record high is further evidence of chronic skills shortages, a key business concern. Firms continue to report that they are facing an uphill struggle to find staff with the right skills, which is stifling business activity and productivity.
“While we expect that interest rates will rise sooner rather than later, with earnings growth underwhelming there remains sufficient scope for the MPC to keep a rates hike on hold for longer, particularly given the current economic and political uncertainty. Instead, more must be done to support firms looking to recruit and upskill their workforce, including reforming the Apprenticeship Levy to ensure its fit for purpose, easing upfront business costs and delivering a future migration system that helps, rather than hinders UK productivity and growth.”