Even before it had really begun, Britain’s living standards recovery is over. In the most recent quarter, average earnings (excluding bonuses) rose by 2.2 per cent, below the current inflation rate of 2.3 per cent. That’s the weakest performance since the summer of 2014 and prices are likely to continue to outstrip pay. Though the UK enjoyed several years of real-terms growth (helping to deny Labour victory in 2015), that wasn’t enough to compensate for the crash. As the Resolution Foundation has warned, average earnings may not return to their pre-crisis peak (2007) until 2022.
There is no mystery about the cause of the renewed squeeze. The pound’s sharp depreciation since the EU referendum has pushed up inflation without a comparable increase in exports. Remainers, unsurprisingly, are pinning the blame on their opponents. The Liberal Democrats’ Tim Farron said: “Workers are now suffering a real fall in living standards. This is not a claim, it is a fact, and the blame lies firmly at the doors of Downing Street.
“The economy has been kept on the life support machine of consumer credit, but people are now clearly in the vice-like grip of a Brexit squeeze. A falling pound and rising prices are depressing sales, and wages simply can’t keep pace with inflation.
“Even at this late hour the Conservative Brexit government could steer the economy away from the rocks by announcing it wants Britain to remain in the single market. Philip Hammond knows what has to be done, and it is about time he laid it on the line to the Prime Minister.
“If the Chancellor and the governor of the Bank of England both know you can’t have a strong economy and a hard Brexit, why is the government steering the economy to disaster? The Conservatives have lost the right to call themselves the party of business and they have lost the last shred of economic credibility.”
But those hoping that the living standards squeeze will inspire a wave of Bregret may be disappointed. The public must first blame the Leave vote for the crunch – and they may not. Once the Brexit negotiations truly begin, focus will shift to the battle between Britain and Brussels. The EU, rather than the UK government, may be blamed for falling incomes.
Even if Leavers do make the connection that Remainers hope it does not follow that they will regret their vote. Once set on a course, the British public are traditionally reluctant to change their minds. And two years may not prove long enough for the anti-Brexiteers.
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