In the wake of a decade of public spending cuts, Bank of England Governor Mark Carney has warned that 2017 will be a “challenging time for British households” in the face of rising inflation, predicting that “wages won’t keep up with prices”.
UK economic growth forecasts for 2017 have been cut by the Bank from 2% to 1.9%.
Inflation is predicted to rise from its February forecast of 2.4% to 2.8%, an increase that the Bank attributed “entirely” to the impact of a weak sterling following the EU referendum last June.
The pound is currently trading 12% lower than before the referendum at around $1.29.
A brighter future?
Beyond 2017, the Bank suggested economic growth could improve, but only if the UK manages to secure a “smooth” Brexit, based around a secure future trading arrangement with the EU.
Carney touched upon evidence suggesting that the threat of a “hard” Brexit, with a lack of certainty about market access and other costs associated with leaving the EU being major factors, could mean that businesses are hesitant to commit to higher wage costs.
In order to accelerate wage growth, it’s essential to ease business concerns over the Brexit process.
Confirming our position within the Single Market and the Customs Union will help this, ensuing confidence in British industries and jobs.
In the face of a reckless approach, will businesses continue to tighten their belts, with economically damaging consequences?
Migration is crucial
Since the vote in June last year, it’s been said time and time again that access to the Single Market is not possible without the free movement of people.
With immigration seen as a key issue for those that voted to leave the EU, the Conservatives have already taken a strong position.
However, a refusal to compromise on the issue of free movement of people could be damaging to the building sector.
The Federation of Master Builders (FMB) has called on all political parties to recognise the important of migrant workers to the construction sector, or risk making their infrastructure and housing manifesto pledges redundant.
Brian Berry, chief executive of the FMB, said:
“The UK construction sector’s demand for skilled migrant workers from the EU and beyond cannot be overstated.
“Through a flexible immigration policy and more high-quality apprenticeships, the next Government will allow construction to act as a bulwark against any Brexit uncertainty.
“For every £1 invested in construction, 92p stays within the UK and £2.84 is generated in the wider economy.
“As the economy adapts to the reality of operating outside of the EU, it’s more important than ever that the Government works closely with strategic industries that offer high levels of productivity and a good return on investment.
That means backing construction and supporting the sector will only become more important as the country looks to make a success of Brexit.”
What are your views? Are you feeling the pinch yet?? Make sure you have your say on election day!