The Longest U.K. Pay Slump in 200 Years Is Coming to an End

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Living standards in the U.K. are on the cusp of returning to their pre-crisis levels in an election boost for Prime Minister Boris Johnson.

In an analysis published Thursday, the Resolution Foundation think tank predicted that basic weekly pay will surpass 513 pounds ($661) by the end of the year, a level last seen in August 2007 after adjusting for inflation.

The prospect of an end to the longest pay downturn in more than two centuries will almost certainly be seized on by Johnson’s Conservative Party, which is campaigning for the Dec. 12 general election on a slogan of getting Brexit done so that Britain can focus on building on promising economic fundamentals.

It marks a sharp contrast to the snap 2017 election, when Theresa May, Johnson’s predecessor, was campaigning against a backdrop of shrinking pay packets and went on to lose her parliamentary majority. Low-paid workers in sectors such as retail and hospitality had benefited from big increases in the minimum wage, the Resolution Foundation said.

But a risk for Johnson is that focusing on the metric reminds voters of the Conservatives’ record on pay since they took office in 2010. Overall, Britons would be 138 pounds a week better off had pay continued to grow at its pre-crisis average of 2% of a year.

“Returning to pre-crisis levels is very different from making up any of the lost ground in the intervening decade,” the research firm said in its latest quarterly Earnings Outlook.

With nominal earnings growing at almost 4% a year, the labor market appears to have returned to full employment but cracks are emerging, it said. Vacancies are falling and the number of people switching jobs remains below pre-crisis levels, while falling productivity threatens to place a limit on pay growth.

To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, David Goodman

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