Wage growth set to support UK’s recovery

Tim Wallace
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STRONG wage growth and low inflation should boost Britain’s economic recovery, analysts at UBS Wealth Management told City A.M.

The recovery has been rapid over the past 18 months, but a weak Eurozone and a slowdown in emerging markets had raised fears the UK would also take a knock.

Instead, UBS hopes wage growth at home will help keep the growth spurt going.

“The evidence suggests that real earnings is already reversing its troubled declines,” said UBS’s Bill O’Neill. Real wages fell eight per cent from their pre-crash peak, as workers saw their pay frozen or cut in the crash years.

“The submissive outlook for inflation will be important, but the key driver should be a resumption of wage growth, which we estimate will reach 1.9 per cent next year and 2.3 per cent in 2016,” the boss of the bank’s UK investment office said.

“Overall, more people in work and rising real wages should see consumption growth accelerate to around 2.5 per cent in 2015 and 2.6 per cent in 2016.”

UBS also expects house prices to rise by six per cent in the 12 months to October 2015.

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