Wage growth is slowing, but there is reason to celebrate as interest rates are expected to fall
WORKERS are unlikely to cheer the news, but a slowdown in wage growth in the UK is being hailed as a positive sign that interest rates will soon fall.
Payroll figures released yesterday showed average weekly earnings rose 7.7 percent annually over the past three months, compared with 7.9 percent the previous month.
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Brits now earn an average of £673 a week, £50 more than the same period last year.
That growth rate is still high by historical standards, but economists said there are signs of a slowdown in the labor market.
As a result, markets assume that the Bank of England does not need to raise interest rates further and could start cutting them in the spring.
Jake Finney, an economist at PWC, said real wages were outpacing inflation, meaning wages would no longer fall.
He added that it “should signal an end to the worst pressures on living standards.”
Salaries were boosted in part by civil servants receiving a £1,500 living bonus, the Office for National Statistics said.
Meanwhile, wage growth in the private sector has remained stagnant, suggesting that companies do not need to offer higher salaries to hire staff.
Nye Cominetti of the Resolution Foundation said: “Private sector wage growth appears to be cooling rapidly.
“This will give the Bank of England reassurance that rising interest rates are having the desired effect, although for workers it could mean that the recent period of rising real wages is about to end.”
Money markets and economists responded by saying the falling wage data addressed one of the Bank of England’s biggest fears, that the economy was in a wage spiral that was driving up inflation.
Because if people get paid more so they can afford to buy more expensive goods, companies will simply keep raising prices to cover the higher labor costs.
Inflation figures released today are expected to show that the rate of increase in consumer prices has fallen to less than 5 percent following a sharp fall in energy costs.
ALDI’S OLDIES
ALDI has a great design to boost Christmas sales – by showcasing older models in its latest adverts.
The discount retailer is using pensioners to model its budget fashion range – including a festive jumper for £9.99 and fluffy clogs for £5.99.
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With this step, the brand is following in the footsteps of luxury brands. Loewe used 88-year-old Dame Maggie Smith as the star of its latest handbag ad.
Charlotte Rampling, 77, is currently fronting a campaign for Massimo Dutti, while Dame Mary Berry, 88, collaborated with British luxury brand Burberry to promote it last month.
IN DEEP WATER
ALMOST all UK water companies have been ordered to pay back millions of pounds to customers after missing their targets.
Regulator Ofwat said Thames Water, which faced a cash crunch over the summer, would face a £74 million fine.
Anglian Water must pay back £27m and Southern Water £21m.
The poor performance is linked to leaky water pipes and the infiltration of sewage into rivers and seas.
However, Severn Trent will be allowed to increase its bills by £89m if targets are met.
The number of companies that went bankrupt reached 2,315 last month, an increase of 18 percent compared to last October.
Restructuring experts blamed higher costs, a deteriorating consumer environment and the end of support programs that kept businesses afloat during the coronavirus crisis.
Body shop sold
THE BODY SHOP has been sold to the owner of sneaker chain Footasylum in a £207million deal.
Aurelius Group, a private equity firm, is said to be committed to maintaining the toiletries brand’s environmental credentials.
The seller was the Brazilian cosmetics company Natura, which also owns Avon.
The company bought The Body Shop from L’Oreal in 2017 in an £850 million deal.
The Body Shop has around 250 stores in the UK and 2,800 worldwide.
£5.6 billion is a miner’s amount
FTSE 100 commodities trader and mining group Glencore has paved the way for a break-up after securing a £5.6bn coal deal.
Glencore, which is based in Switzerland, said yesterday that it had ended a months-long pursuit of Canadian group Teck Resources and had instead agreed to buy a majority stake in its coal division.
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Teck rejected a full takeover offer worth $23 billion (£18.4 billion) in April.
Instead, Glencore CEO Gary Nagle will make a name for himself by spinning off his enlarged thermal coal division into a new company and listing it on the New York Stock Exchange.
He told the Times that listing in New York, rather than remaining in the city, “would achieve a better valuation and the best demand for the company.”
Shares in Glencore rose 19.55 pence, or 4.54 per cent, yesterday, valuing the company at £55 billion.
VODA LARGE HANGER
VODAFONE admits it has lost 49,000 postpaid customers in the UK after raising prices by 15 per cent this year.
However, Vodafone’s UK business reported revenue growth of 4.1 percent, helped by the popularity of its Voxi service, which offers unlimited social media usage for £12 a month.
Overall, the company reported a 44 percent fall in operating profit to £1.47 billion.
The company still needs to obtain regulatory approvals to combine its UK mobile business with THREE.