Saturday 27 May 2017

Bank warns sterling slump will hit pay deals for Britons

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British employers plan to offer the least generous pay deals since 2012 this year, the Bank of England has said, underscoring its view that the UK economy is set to suffer from the effects of the Brexit vote.

The UK economy surprised investors last year when it outpaced its peers among the world's big rich nations, driven by the spending of households who shrugged off the vote to leave the European Union.

But the pound's fall of more than 15pc against the dollar since June's referendum is pushing up inflation and is likely eat into the spending power of many households, the Bank says.

Inflation was running at 1.6pc year-on-year in January, its highest since mid-2014, and is projected by the Bank to be running at 2.7pc in the final quarter of 2017.

In a regular survey of 700 businesses across Britain, the Bank said price pressures were building across supply chains, and firms expected inflation to spread beyond food and fuel prices to a wider range of goods and services this year.

"Consumer spending growth had remained resilient, but was expected to ease during the year as prices rose," the Bank said, reporting on what it had been told.

The Bank predicted last week that the economy as a whole would retain much of its momentum this year and grow by 2pc. (Reuters)

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