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UK earnings rising at slowest rate for 18 years

Figures released by the government today show that UK earnings are rising at the slowest rate for 18 years. This points to a worsening economic situation in the UK with salary payments for the three month period ended January 2009 rising by just 1.8%. Even though the UK recession does not appear to have hit the bottom as yet this is the slowest rise in earnings since the 1991 recession and well down from the 3.1% in the three months prior to December 2008. So what does this actually mean for the UK economy?

In reality the slowdown in earnings increases across the country will severely impact upon consumer spending power which will obviously have serious implications for the overall UK economy. A lack of spending power will see prices in the shops fall, business costs cut and increased redundancy numbers (something which has been highlighted by the record growth in the unemployment number last month). So what can the UK government do to counteract the expected fall in spending power?

It was also revealed today, via the last MPC meeting notes, that quantitative easing could be with us for longer than many had expected with the Bank already having put in place an extension of the program and the finance required to complete this. However, there does appear to be some debate as to whether UK base rates will fall much further with some members of the MPC of the opinion that further reductions will have little impact and other methods of refloating UK economy would be more beneficial.

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