"Can't Even Afford Meals Due to No Money"…UK Sees Record Largest Real Wage Drop Amid Soaring Prices

July Consumer Price Inflation Hits Double Digits for the First Time in 40 Years
Real Wages Fall at Record Largest Rate
Energy Bill Payment Refusal Campaign Underway

A customer is handing over a 10-pound note as payment for fruits and vegetables at a greengrocer in London, England. [Image source=Yonhap News]

[Asia Economy Intern Reporter Kim Gun-chan] The UK’s consumer price inflation rate in July hit double digits for the first time in 40 years, while real wages also fell by the largest margin on record. As soaring grocery prices lead more people to cut back on food expenses, a campaign to refuse energy bill payments is also underway amid a sharp rise in energy costs.

According to the UK Office for National Statistics on the 16th (local time), real wages in the second quarter fell by 3% compared to the same period last year. This is the largest decline since records began in 2001.

The reason for the decline in real wages is related to the inflation rate. During this period, average wages excluding bonuses rose by 4.7%, but the inflation rate was much higher. The UK’s consumer price inflation rate in July was 10.1%, marking double digits for the first time in about 40 years. This is the highest level since February 1982. The Bank of England (BOE) raised the base interest rate by 0.5 percentage points last month and predicted that the year-end inflation rate would exceed 13% due to the impact of rising energy prices.

The soaring grocery prices had a particularly large impact. The Office for National Statistics stated, “The main driver of inflation in July was food, with significant price increases in bread, cereals, milk, cheese, and eggs.” According to market research firm Kantar, the UK’s grocery price inflation rate in July was 11.6%, the highest since the survey began in 2008. Kantar analyzed that “considering the inflation rate, the average household’s grocery shopping costs will increase by ?533 (about 850,000 KRW) annually.”

Due to the soaring grocery prices, more people in the UK are trying to reduce their food expenses. According to an online survey jointly conducted by online polling company YouGov and The Times on the 8th and 9th, 50% of respondents said they had cut back on eating out. 39% said they picked up items they usually buy at the supermarket but put them back due to the high prices. 16% said they regularly skipped meals over the past six months to save money.

The consumer price inflation rate in the UK for July reached 10.1%, marking double digits for the first time in about 40 years.
[Image source=Yonhap News]

The problem is that this trend is likely to continue. In particular, the sharp rise in energy prices is expected to deal a heavy blow to household finances. The current energy price cap for UK households is ?1,971 (about 3.11 million KRW) annually. This is more than a 50% increase compared to ?1,277 (about 2.02 million KRW) in October last year.

Senior economist Debopratim De of consulting firm Deloitte forecasted that “low-income households could spend up to 25% of their income on energy costs” due to the energy price hike. The UK daily The Telegraph predicted that “by January next year, the average electricity and gas bills will account for one-sixth of wages.”

As energy prices soar, a campaign to refuse energy bill payments is underway in the UK. According to Bloomberg on the 15th (local time), the group leading the energy bill refusal campaign, “Don't Pay,” announced that “more than 170,000 UK citizens have pledged to stop paying electricity and gas bills starting in October.” They plan to take collective action if the government fails to resolve the crisis after receiving one million signatures by October 1.

Jeffrey James, head of Don't Pay, said, “Refusing to pay bills will become a symbol of resistance against unfair and unjust pricing by energy companies,” adding, “The British people refuse to fall into fuel poverty, and we no longer want to pay for the profits of energy companies.”