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Friday, May 12, 2017

Brexit set to hit the pound in our pocket

We have not yet left the EU so it is impossible to assess the full impact of Brexit as yet, but the ramifications of the decision we took last June are starting to feed through the system. In particular they are starting to hit our cost of living.

That was certainly the message of the Governor of the Bank of England yesterday, who warned that the impact of Brexit will contribute to a dramatic drop in real-terms pay this year with average workers due to be left hundreds of pounds out of pocket.

As the Independent reports, Mark Carney predicted that Inflation is set to be higher than pay growth, marking the first year since 2013 that workers have been hit by a real-terms cut in take-home pay. It makes the Prime Minister's determination to deliver a hard Brexit appear to be even more reckless:

The warning by Mark Carney follows controversy over rising energy bills and inflation-busting increases in council tax that have already hit household budgets ahead of the 8 June general election:

At the Bank’s press conference, Mr Carney said the squeeze in real incomes was “not all because of Brexit”, because pay growth had been weak for several years.

But he said wages were falling partly because firms are worried about trading prospects outside the EU, causing them to offer “more modest pay settlements”.

The alarm over family incomes was sparked by the Bank forecasting that average weekly earnings will rise by just 2 per cent in 2017 – way down on the 3 per cent it expected in February.

At the same time, it said it now expected that inflation will hit 2.7 per cent this year, rather than 2.4 per cent.

The real question is how this will hit people's voting intentions and their perception of Brexit. It is now more important than ever that we get the final say on whatever deal is negotiated.
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