Fall in UK’s real wages ‘cannot go on forever’

The fall in real wages in the United Kingdom cannot “go on forever”, the Confederation of British Industry warned yesterday, warning that the squeeze on household budgets “has taken its toll”.

"The financial crisis and the slow recovery have hit people's finances hard," declared the organisation's director-general, John Cridland, though "living standards will gradually improve as the economy does".

However, the CBI said improvements in take-home pay must come from cuts in national insurance payments and extra help for couples who often have to spend a third of their income on childcare.

Saying that he agreed with the Trades Union Congress, Mr Cridland said a wage rise is need to encourage consumption and "a greater sense that everybody is sharing' in the UK's economic recovery.

“People have had to wait, they’ve had to be patient, but that’s because this was a deep recession,” he went on, but he opposed calls that the Government should raise the UK’s minimum wage saying that politicians “cannot create a single job”.

However, real wage rises will only be possible if the UK improves its productivity rates and education, encourages social mobility ‘to make the best of Britain’s talents’, he told the CBI’s annual conference in London.

Mr Cridland rejected the idea that traditional mid-level, white-collar jobs have been squeezed out of the British economy: “They have not disappeared – but they have become more highly-skilled.”

Jobs that once required high secondary level grades now need college certificate and the situation will only become more acute because half of all jobs available in just eight years time will need such standards.

Meanwhile, prime minister David Cameron insisted that his efforts to renegotiate the UK's membership of the European Union had not, and would not damage the economy as he pointed to record investment by foreign companies.

“Simply standing here and saying we will stay in Europe and stick with whatever we have – come what may – is not a strategy and it just won’t work,” he told business leaders attending the conference.

Saying that existing rules are “not working properly for us”, Mr Cameron insisted that changes are needed, but he vowed to protect the single market and ensure that the UK is not “ordered around by the single currency countries”.

“These things can be negotiated and we can then hold that in/out referendum and give people a proper choice about staying in a reformed European Union or opting not to belong to it.”

However, he was given a warning by the CBI's president, Sir Mike Rake, who said the UK faces two choices – to cut itself off from the world, or to embrace new ideas and people in ways that have always been its foundation.

Citing the experience of BT – who have brought in foreign engineers to help it deliver high-speed broadband, Mr Rake said “immigration has been and is part of the solution to the skills shortages faced by the UK”.

Noting the anti-immigration feelings now evident in Britain, the CBI leader accepted that there is “a disconnect between the experiences of businesses and the public at large’ about immigrant”.

“With tightening immigration controls at the top of many voters’

priorities for government, it is an issue and concern that politicians cannot ignore. Businesses must recognise this.”

“Immigration can have consequences at a local level, with pressure on housing and schools. In some areas, concerns about immigration have become a substitute for frustrations with living standards,” he said.

“Business has a vital role to play in ensuring the debate is based on the facts whilst recognising the genuine concerns of the public around immigration, including on public services, jobs and welfare.”