It isn’t all smiles on the economic front

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Photo: Brian Bergmann

Figures by the Office for National Statistics today revealed the UK’s GDP rose by 0.6% in Q2, appearing to toss away fears by Remain campaigners prior to the EU referendum.

The figures, covering April to June, showed GDP grew faster than in the previous quarter, where it rose by 0.4%.

The announcement was greeted enthusiastically by the government, with Chancellor Philip Hammond declaring it was a sign of the UK’s “fundamentally strong” economy.

The news is good for the industrial sector (which saw its best performance for almost 17 years), and likely acted as a reassurance for investors in what was tipped to be an unstable post-Brexit economy.

Of course, the figures do not cover post-Brexit, and many economists warn against being overly optimistic.

“GDP growth in Q2 looks likely to represent one last hurrah for the economy before it enters a softer and more turbulent period. The lack of momentum as the economy entered Q3 means that the chances of a negative reading for the current quarter are relatively high” said Martin Beck of the EY ITEM Club.

And yet, there was one significant piece of news which was not so widely lauded in the headlines today: The UK’s real wage growth is now at the bottom of the league table.

UK real wages fell 10.4% between 2007 and 2015, putting it on par with Greece in the list of OECD countries.

Overall, real wages rose by an average 6.7% amongst OECD countries, with Poland (23%) and Germany (14%) having some of the highest growth figures.20160727_ma_wages

Researcher for Institute for Fiscal Studies, Rob Joyce, said: “It is not just unusual in international terms but also unusual historically for the UK. Real wages have fallen and haven’t recovered. That’s striking.”

Real pay is the relationship between wages and inflation, and for six years following the crash the UK saw inflation exceed wages.

The government has said the figures, published by TUC, fail to show the UK’s rising employment rate. According to ONS, UK employment rose to 31.7m by July of this year, up 624,000 a year earlier.

Yet, the UK still suffer from high levels of in-work poverty. The much-cited research by IFS showed in 2013-14 two-thirds of children in working families were living in poverty.

If Theresa May is to truly deliver on her pledge to make Britain work for all, “not just the privileged few”, then the focus must be on the quality of work, not simply putting people into jobs in which they may in fact be worse-off in.

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