Londoners escape worst of inflation crisis with big pay hikes

Bloomberg

London residents are weathering the cost-of-living crunch better than people in the rest of the UK, one research group concluded. Residents of the capital saw their real wages adjusted for inflation slip by £9 ($11.13) a week compared to a year ago during the fourth quarter of 2022, research from the Centre for Economics and Business Research indicates.
At the other end of the scale, Northern Ireland saw real wages slide by £26 per week. The average across the UK was £19, CEBR said. The figures emphasized the widening wealth gap between London and the rest of the UK. Part of this was to do with wage growth accelerating faster in the capital than elsewhere, surpassing 8%.
Added to that, modeling from the CEBR based on regional disparities in spending patterns implied that areas outside the capital – especially Northern Ireland and Scotland – were suffering the highest level of inflation. The figures follow official data showing the UK’s poorest regions were also hit by the highest rates of ill health and people dropping out of the workforce.
This will pile pressure on Prime Minister Rishi Sunak’s government to reduce inequality across the country — part of a “levelling up” program that the previous Prime Minister Boris Johnson vowed would be a “defining mission” of his premiership. Improving public health imbalances would be important “not only to the individual, but also to the economy as a whole,” said Karl Thompson, an economist at CEBR. Wales, Yorkshire, and the West Midlands had the lowest shares of residents who said in the 2021 Census that they are healthy, said Thompson.
“Though there are several factors at play, lower real earnings imply lower living standards and therefore often fewer resources available to lead a healthy lifestyle,” Thompson said. During his premiership in 2021, Johnson unveiled the £4.8 billion Leveling Up Fund backed by the taxpayer which would invest in infrastructure across the UK. Just last week, the government revealed a list of 111 projects that will receive a share of the £2.1 billion handed out in the fund’s second round. Those include a new rail link in Cornwall and an artificial-intelligence campus in Blackpool.
But as Levelling Up minister Michael Gove prepares to speak at the Convention of the North in Manchester on Wednesday, he may be forced to defend the pace of the government’s actions. A separate study from forecasting group the EY Item Club today warned that Chancellor Jeremy Hunt’s plan to tighten the public purse strings will deepen the UK’s recession.
The Item Club is predicting output will shrink by 0.7% this year.