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Latest NewsInflationPay & benefitsProductivityPay settlements

Average UK households £8,800 poorer than French and German equivalents

by Adam McCulloch 21 Jul 2022
by Adam McCulloch 21 Jul 2022 Photo: Shuttestock
Photo: Shuttestock

The average British household is £8,800 poorer than its equivalent in five comparable countries, research has found.

According to think tank the Resolution Foundation, a “toxic combination” of poor productivity and a failure to narrow the divide between rich and poor has resulted in a widening prosperity gap with France, Germany, Australia, Canada and the Netherlands.

The think tank’s new Stagnation Nation report claimed that if the UK were to match the average income and inequality levels of those countries, its typical household incomes would be a third higher and those of the poorest households two-fifths greater.

“Britain is a rich country, with huge economic and cultural strengths,” said Resolution Foundation chief executive Torsten Bell. “But those strengths are not being built on with the recent record of low growth leaving Britain trailing behind its peers.

“This forms a toxic combination with the UK’s high inequality, leaving low- and middle-income households far poorer than their counterparts in similar countries.

“We must turn this around, but we are not on track to do so. We underestimate the scale of our relative decline and are far from serious about the nature of our economy or the scale of change required to make a difference. This has to change.”

The think tank said that during the 1990s and early part of the 2000s the UK had closed the productivity gap with France and Germany but the gap had since widened from 6% to 16% – the equivalent of about £3,700 per person.

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Its analysis found that although the top 10% wealthiest households in Britain were richer than those in many other European countries, middle-income British households were 9% poorer than their counterparts in France, while the poorest fifth of households in Britain were more than 20% poorer than their French and German equivalents.

Meanwhile, the cross-party Treasury committee has warned of the risk of too much “chop and change” in the government’s economic approach, warning of a lack of long-term thinking after the abolition of its industrial strategy and replacement with the plan for growth.

Mel Stride, the committee’s chair, said: “We have a new chancellor and shortly will have a new prime minister. Getting a grip on productivity will be key to kickstarting economic growth and stimulating greater business investment in the UK. The evidence that we received suggests there needs to be greater stability and long-term certainty in government policymaking.”

Yesterday figures emerged suggesting that pay packets in the UK were falling at a record pace. Official figures show that total earnings were growing at an annual rate of 6.2% in the three months to May, while regular pay – excluding bonuses – was rising 4.3%. However, when accounting for inflation, total pay was shrinking by 1.9% compared to the Consumer Prices Index (CPI) over the period and regular pay fell 3.7%. Using the Office for National Statistics’ preferred measure of CPI including housing costs, total pay was down 0.9% and regular pay fell 2.8% – the biggest drop on record.

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The data also showed that unemployment was down 0.1 percentage points compared to the previous quarter, to 3.8%. The number of staff on payroll in June rose by 31,000 to a record high of 29.6 million, while vacancies in the three months to June stayed near their peak at just under 1.3 million. Yael Selfin, chief economist at KPMG UK, said: “Robust growth in regular pay masks a weakening purchasing power of households as real earnings growth fell for the sixth consecutive month.”

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Adam McCulloch

Adam McCulloch first worked for Personnel Today magazine in the early 1990s as a sub editor. He rejoined Personnel Today as a writer in 2017, covering all aspects of HR but with a special interest in diversity, social mobility and industrial relations. He has ventured beyond the HR realm to work as a freelance writer and production editor in sectors including travel (The Guardian), aviation (Flight International), agriculture (Farmers' Weekly), music (Jazzwise), theatre (The Stage) and social work (Community Care). He is also the author of KentWalksNearLondon. Adam first became interested in industrial relations after witnessing an exchange between Arthur Scargill and National Coal Board chairman Ian McGregor in 1984, while working as a temp in facilities at the NCB, carrying extra chairs into a conference room!

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