Business is going well, thank you, while the workers are getting poorer | Phillip Inman

Signs that corporate Britain is winning the war on inflation can be found everywhere you look.

Look beyond the struggling independent retailers and small manufacturers that dominate the television and radio news to the sales and profits of our biggest companies, where robust performance is the norm and promises of big payouts to shareholders come true.

In response to this safe outlook for most businesses, the UK share market rallied to near all-time highs on Friday, providing investors with the perfect marriage of a steady stream of income and increased wealth.

Crisis, what kind of crisis? The view from the boardroom is rosy – managers seem to have found a way to pass on the extra costs suppliers charge to customers.

This does not mean that the three years marked by the Covid-19 pandemic and the Russian invasion of Ukraine passed easily. It was very difficult to manage, and thousands of business people worked day and night to keep their organizations alive.

However, huge government subsidies, mostly without strings attached, meant they were able to weather the storm with profitability largely intact.

Meanwhile, the standard of living of households is collapsing. That’s a drop that the Resolution Foundation’s latest estimate will amount to a 7% drop in disposable income – or £2,100 per household – over this year and next. This is a disaster and will dwarf the 5% drop in disposable income that followed the 2008 financial crisis.

Mortgage holders due to refinance their loan this year will find the hit to their income increased by an average of £3,000 a year in extra interest following nine increases in the Bank of England’s base rate.

If there is a justification for double-digit price increases, it would surely be that employers are not only dealing with skyrocketing energy bills and skyrocketing raw material prices, but also giving all employees a 10 percent pay rise. The basic rule is that wages represent 70% of the company’s costs, so in the absence of a double-digit wage increase, a double-digit price increase cannot be justified.

Next week, data from the Office for State Statistics will show how much earnings rose in the year to November, and City analysts expect the figure with bonuses to be the same as for the year to October, which was 6.1%.

That’s more than four percentage points behind inflation, which we’ll also get an update on next week. Those same City analysts expect the latest Consumer Price Index (CPI) for December to show price increases still in double digits, with only a slight drop, from 10.7% to 10.6%.

Last week’s data from employment website shows the situation is even worse for many workers. A look at the recruitment site reveals hospital trusts looking for qualified nurses with a pleading message and promises of excellent benefits – which would otherwise mean rapidly rising salaries.

Not for nurses. Wages for new starters rose by just 2.9% over the past year. Existing staff are still awaiting the outcome of salary negotiations.

Perhaps someone at the Department of Health has shown the health minister, Steve Barclay, these figures, and that is why he is backing away from an earlier decision to stick with his body’s modest 4% pay review recommendation.

Private sector workers do not fare much better unless they are in the City of London, the technology industry or the business services sector such as accountancy. The average annual wage payment at large employers is stuck at 4% and there is little incentive behind workers’ demands for a bigger increase.

Indeed says its tool for tracking more than 7,000 different job titles and thousands of employment subcategories shows that average wage increases have fallen from 6.4% to 6% since June and continue to slide.

Contrast this with Germany, where Indeed says wage growth reached 7.1% in October while inflation was 10.4%; or France, where wages rose by 5%, while inflation was 7.1%.

Most workers are suffering from falling disposable incomes, but those in the UK are suffering more than most in Europe.

Could it be that British workers are poor negotiators, even compared to British pensioners, who have made it clear to every government since the turn of the century that they will only vote for a party that takes care to increase their state pension at least in line with inflation and their private pensions protected?

American consumers are slowly waking up to the colossal rip-off that results from monopoly capitalism, but British consumers allow price gouging without justification. Unless they believe that protecting the interests of international investors is a good reason to accept high prices and low wages, they must act now.

Leave a Reply

Your email address will not be published. Required fields are marked *