UK Recovery Threatened by Low Wages

Britain’s economy has been on the up over the last few months, with an improving employment picture and rosier growth prospects.

But the average Briton has yet to feel this in their wallets: Weekly real wages are growing far below the 2 percent inflation level at 0.9 percent. And it doesn’t look like this could improve. The U.K.’s economic uptick is down to increased spending and not productivity. This could threaten the long-term prospects for the country’s recovery, according to a report by a leading think tank.

“It is because the recovery so far has been driven by consumer spending rather than increased productivity, so people have spent more and have had to reduce their savings to do so, but they are not earning more,” Jonathan Portes, director of NIESR, told CNBC in a phone interview.

While NIESR raised their forecast for the U.K. economy, predicting it to grow 2.5 per cent in 2014 and 2.1 per cent in 2015, productivity stagnation “poses a downside risk to the UK’s medium-term prospects”.

via CNBC

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