HOUSEHOLDS in Great Britain are being squeezed by a continuing year-on-year fall in pay in real terms because of the inflation surge triggered by sterling’s post-Brexit vote tumble, official figures show.

The data, published by the Office for National Statistics yesterday, show average weekly earnings for employees, both

including and excluding bonuses, were in the three months to July down by 0.4 per cent on the same period of last year.

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This continuing real-terms fall in pay was viewed by economists as relieving pressure on the Bank of England to raise UK base rates from their record low of 0.25 per cent this week. The Bank’s Monetary Policy Committee is due to announce its latest decision on interest rates today.

Howard Archer, chief economic adviser to the EY ITEM Club think-tank, noted a jump in annual inflation in August had “tightened the squeeze on consumers”.

ONS data on Tuesday showed annual UK consumer prices index inflation surged from 2.6 per cent in July to 2.9 per cent in August, even further above the Bank of England’s two per cent target, as clothing and petrol prices jumped. Scottish Chambers of Commerce chief executive Liz Cameron flagged the squeeze on consumer finances and urged the Bank not to raise base rates.

In nominal terms, average weekly earnings for employees in Great Britain in the three months to July were up by 2.1 per cent on the same period of last year, both including and excluding bonuses.

This was the same year-on-year rise in nominal earnings as in the three months to June and adrift of the 2.3 per cent increase forecast by economists. It shows the continued weakness of nominal pay settlements, in spite of the surge in inflation. Annual UK CPI inflation was only 0.3 per cent in May last year, just ahead of the UK electorate’s vote to leave the European Union.

The Confederation of British Industry

highlighted the importance of “substantive progress” in the UK’s Brexit negotiations with the EU, and swift agreement on transition arrangements, in terms of enabling businesses to boost wages.

Chris Williamson, chief business economist at IHS Markit, said: “With the latest inflation data showing prices rising at an annual rate of 2.9 per cent, households’ real incomes are being increasingly squeezed. Not surprisingly, the pay squeeze is feeding through to lower consumer spending.”

He added: “[The] data…highlight that there’s still no sign of average wage growth picking up despite the low level of unemployment, which provides a strong argument for policymakers to wait until wage growth revives rather than hiking [base rates] early in the expectation that it will do so.

“It may yet be some time before we see pay growth approach anything like worrying levels from a monetary policy perspective.”