Wages down as prices and profits soar. Corporate Britain has is it far too easy

Real wages fell by 4.4 per cent between the third quarter of 2007 and the third quarter of 2017, profitability has grown from 11.4 per cent to 12.6 per cent over the same period 

James Moore
Chief Business Commentator
Friday 12 January 2018 11:44
Comments
British workers have endured nearly a decade of falling real wages
British workers have endured nearly a decade of falling real wages

British workers only need to compare their payslips with their bills to understand that the fruits of economic growth in this country are not being shared.

Throughout much of the expansion of the British economy since the financial crisis (it started go grow beyond the pre financial crisis high in 2013) wage rises failed to match the level of inflation. That started to change at the end of 2014, but the improvement was not sustained, and having started to fall again last year they remain resolutely underwater.

Corporate profitability? Well that’s a very different story.

According to the Office for National Statistics, it was running at 12.6 per cent for non financial companies in the third quarter of 2017. That compares with 11.4 per cent in the third quarter of 2007. In the aftermath of the financial crisis it fell to a low of 9.3 per cent in the second quarter of 2009, but after that the recovery was quite rapid.

Companies in Britain’s dominant services sector have it even better, with the stats showing that their returns broke through the 19 per cent barrier in the third quarter of last year.

Corporate Britain has been doing very well. So have its executives, at least judging by the High Pay Centre’s annual Fat Cat Day at which the average FTSE 100 CEO has been paid what it takes the average worker a year to make. It usually falls in the first week of the New Year.

But real wages, adjusted for inflation, for those average workers? Down by 4.4 per cent, the TUC says, over the period in question.

Now it’s not just through squeezing their workers that companies have been able to live the high life. The profitability figure I quoted is also affected by how much they choose to invest (not enough), and by the competitive pressures they face. It would suggest that the latter is insufficient. The consumer is taking a hit too.

With corporation tax having also steadily fallen, you could argue that corporate Britain has never had it so good. The economy works wonderfully well for it and it’s clear from these numbers that the scales have tipped too far in its direction.

The TUC is quite right when it says the British worker needs a pay rise. The British consumer also needs a price cut. The British economy, while growing, needs a great deal more investment. The official statistics are a demonstration of how well Britain works for the few and how badly it fails the many.

The imbalances that have created that situation need to be addressed. However, it will probably take a change of Government for that to happen.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in