Budget nightmare: Wage growth drops to 1.8 per cent

Emma Haslett
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Workers have enjoyed higher wage growth in recent months (Source: Getty)

Wage growth fell to 1.8 per cent in the three months January, down from 2.1 per cent in the three months to December and way below expectations of 2.2 per cent. Excluding bonuses, that figure fell to 1.6 per cent.

The figure, published this morning by the Office for National Statistics, will come as a disappointment to the chancellor, who is due to focus on the coalition's achievements during his Budget later today.

Howard Archer, chief UK and European economist at IHS Global Insight, suggested wage growth over the coming months could be weaker than hoped.

This does raise some question marks about just how robust earnings growth will be over the coming months. There is the possibility that a number of employers could use very low inflation as a reason to limit pay 2015 increases; this could potentially stretch some workers when inflation moves back up.

The news caused the pound to fall 0.5 per cent against the dollar, to 1.497, its lowest in five years. It also dropped 0.7 per cent against the euro to 1.383.

George Osborne may wish to focus more on unemployment, which was flat at 5.7 per cent during the period, the lowest figure since before the recession. However, economists had expected it to fall to 5.6 per cent.

Meanwhile, the proportion of people in work rose to 73.3 per cent, the highest figure since records began in 1971.

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