The British Retail Consortium (BRC) has urged Chancellor Philip Hammond to do “all he can” to encourage shoppers to spend ahead of next week’s Budget, as pay growth falls behind.
Earnings grew by 2.2% in the three months to September, according to the latest labour report by the Office for National Statistics (ONS).
The BRC said this shows “little sign of keeping up with inflation”, with the pay growth rate leaving UK household wages falling in real terms.
Head of retail insight and analytics Rachel Lund outlined concerns that household budgets will be stretched in the run-up to the festive period, leaving retailers with “little choice but to compete harder in what is already one of the most competitive markets in the world”.
“The lack of wage growth is a concern for both retail and the UK economy. The Bank of England and other forecasters, have consistently expected an imminent pick up in wage growth and been disappointed.”
She pointed out that this time last year, the Bank of England expected pay growth to reach 2.75% by the end of the year, while two years ago it predicted it would be at 4%. It currently forecasts the wage growth rate to be 2.25%.
Lund said: “[Reports] by the Bank’s agents suggest higher pay growth might be in the pipeline, however if activity doesn’t pick up businesses may not be in a position to put those pay increases in place. So we urge the Chancellor to do all he can next week to support UK consumers with a budget for shoppers.”