Inflation
Latest figures from the Office for National Statistics (ONS), published in September 2013, show that the Consumer Prices Index (CPI) grew by 2.7% in the year to August 2013, down from 2.8% in July. The largest contributions to the decrease in CPI came from transport (fuel and air transport) and clothing sectors. This was offset partially by upward contributions from furniture, household equipment and maintenance. These latest figures demonstrate the trend of generally steady rates of inflation since early last year. CPIH (CPI including housing) remained unchanged this quarter at a growth of 2.5%
Growth
According to recently published quarterly accounts from the ONS, UK Gross Domestic Product (GDP) in volume terms was estimated to have increased by 0.7% between Q1 2013 and Q2 2013. This figure was unrevised from the second estimate of GDP published in August this year. Between Q4 2012 and Q1 2013, GDP was 0.3%; this means GDP has increased by 0.4% in one quarter. Additionally, when we look at year-on-year comparison, GDP has increased by 1.3% comparing Q2 2012 and Q2 of this year. Contributors to the increase in GDP included the construction and industrial sectors, which expanded at their fastest rate for three years. Economic experts from research firm Markit, expect the economy to strengthen this year. Chris Williamson, Chief Economist at Markit said, “the UK economic recovery gained momentum in the second quarter…further acceleration looks likely in the third quarter”. Welcome news for UK businesses.
Labour market
The more positive news continues when we look at the latest figures from the ONS for the UK labour market. The rate of unemployment was down to 7.7% of the economically active population in May to July this year, down 0.1% from February to April. The employment rate was up to 71.6% in the three months to July, up 0.2% on the three months to April. Overall, there were 2.49 million unemployed people from May to July, down 24,000 from February to April. Total pay between May and July rose by 1.1% and regular pay by 1.0%. In cash terms, this rise means that average weekly earnings excluding bonus were £447 in July this year.
Pay settlements
Analysis of IDSpay.co.uk shows that in the three months to the end of August, the median basic pay award across the whole economy was 2.4% with the interquartile range sitting at 2.0% to 2.8%. The interquartile range narrowed in the three months to the end of August compared to the three months to the end of May. Looking at just the private sector, the median pay settlement is slightly lower than for the whole economy, standing at 2.05% and the interquartile range remains the same as for the whole economy. With the current rate of inflation sitting at 2.7% in August, this means that many people are still experiencing pay which falls short of inflation.
London living and working
The London Living Wage is calculated by taking account of the wage needed to meet the costs of a basic budget for a range of households and of 60% of the median income for London. The results of these two calculations are averaged and 15% added as a margin to cover for unforeseen events.
Since the recession began in 2008 this living wage has increased by 14.8%, yet average weekly earnings in London have only grown by 6.5%. This suggests a real disconnect between the cost of living in London and the actual pay awards being given to help keep up with this spiralling cost.
RESEARCH
|
Year |
London Living Wage |
Annual change % |
London – Average Weekly earnings |
Annual change % |
National Minimum Wage |
Annual change % |
|
2005 |
£6.70 |
- |
£555.80 |
- |
5.05 |
- |
|
2006 |
£7.05 |
5.2% |
£572.40 |
3.0% |
5.35 |
5.9% |
|
2007 |
£7.20 |
2.1% |
£580.90 |
1.5% |
5.52 |
3.2% |
|
2008 |
£7.45 |
3.5% |
£612.70 |
5.5% |
5.73 |
3.8% |
|
2009 |
£7.60 |
2.0% |
£627.40 |
2.4% |
5.8 |
1.2% |
|
2010 |
£7.85 |
3.3% |
£642.30 |
2.4% |
5.93 |
2.2% |
|
2011 |
£8.30 |
5.7% |
£649.40 |
1.1% |
6.08 |
2.5% |
|
2012 |
£8.55 |
3.0% |
£652.80 |
0.5% |
6.19 |
1.8% |
|
|
|
|
|
|
|
|
|
Change since 2005 |
27.6% |
17.5% |
22.6% |
|||
|
Change since 2008 |
14.8% |
6.5% |
8.0% |
References
Quarterly National Accounts, Q2 2013, Office for National Statistics, published 26 September 2013.
Consumer Price Inflation, August 2013, published 17 September 2013.
Labour Market Statistics, September 2013, published 11 September 2013.
‘UK economic growth confirmed at 0.7%’ BBC News, published 26 September 2013.
IDSpay.co.uk.
‘The cost of living and working in London’ IDS Pay & Reward, published 26 September 2013.
