IFS warns of biggest squeeze on pay for 70 years over Brexit

Workers in Britain face the longest squeeze on their pay for 70 years as Brexit knocks wage growth and stokes inflation, a leading thinktank has said.

Picking over Philip Hammond’s first autumn statement, the Institute for Fiscal Studies said that by 2021, real wages in the UK – pay adjusted for inflation – will still not have recovered to their 2008 level before the global financial crisis hit.

Paul Johnson, the thinktank’s director, said: “One cannot stress how extraordinary and dreadful that is, more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years and quite possibly the last 100.”

Analysis The IFS was not wrong to describe shrinking UK pay packets as dreadful

Given that real wages will still be below their 2008 level in 2021, the outlook for people on low and middle incomes is bleak the effects of the Brexit vote look set to prolong that pain well into a second decade, on the IFS’s reckoning. Pensioners, on the other hand, would be largely protected from an expected sharp pickup in inflation on the back of a weaker pound.

The thinktank also said Hammond had done little to put “more money in people’s pockets” despite government pledges to help “just about managing” families or Jams. In fact, the impact of rising costs and a benefits freeze announced by George Osborne in 2015 would leave working households worse off.

“Given the choice between jam today in the form of more money in people’s pockets and jam tomorrow in the form of potential economic returns from greater investment, he went for jam tomorrow,” it said.