UK economic outlook worsens as income inequality rises

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Growth in UK manufacturing and services activity plunged to its lowest level in 15 months, fueling recession risk. Business activity hit its lowest level since January 2021, when the country was in full lockdown. The UK’s Composite Purchasing Managers’ Index, an indicator of overall economic health, fell sharply to 51.8 in May from 58.2 in April.

Chris Williamson, chief economist at S&P Global Market Intelligence, said the results suggested “the worst is yet to come”. He added that businesses cited an increasingly cautious mood among households and business customers linked to the cost of living crisis, Brexit, rising interest rates, Covid lockdowns in China and the war in Ukraine.

Despite a tight labor market, income inequality in the UK is growing, with wages rising fastest for the highest earners, while those on the lowest incomes are hit hardest by the surge in coronavirus. inflation. Recent payroll data from HM Revenue & Customs, which includes bonuses, shows that for the top 1% of employees, pay rose by more than 7% in real terms between December 2019 and March 2022. For the tenth lowest paid salary in real terms the growth was slightly above 2%.

The acceleration in wages at the top of companies is a clear reversal in the years before the pandemic, when incomes rose fastest for the lowest paid, partly due to rapid increases in the minimum wage in the UK United.

There is also the problem of price increases that outpace wage gains, even in the hot US job market where companies are willing to offer more competitive and higher wages. Over the past year, prices for urban consumers in Atlanta, for example, have risen 10.8%, more than the 7.9% increase across the country in April, according to the Bureau of Labor. Statistics. The latest data from the agency shows that real hourly wages, adjusted for inflation, are down 2.6% year on year.

“We have this situation where it’s not really interesting to participate in the labor market. It’s expensive to go to work, especially if you don’t earn much and need to find daycare,” said Nela Richardson, chief economist at ADP.

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