LONDON: UK living standards fell at the fastest pace in almost eight years in December, a squeeze that is set to intensify in April when energy bills and taxes are due to soar.

       The average wage excluding bonuses rose 3.6% from a year earlier, less than the increase in consumer prices, the Office of National Statistics (ONS) said yesterday.

       Adjusted for inflation, wages fell 1.2%, the biggest decline since 2014.

       The figures came in a report that showed the labour market remained buoyant, with employers adding jobs for a 14th month in January in a bid to fill more a record number of unfilled vacancies.

       Job-to-job moves also reached a record, driven by an increase in resignations.

       But while worker shortages, made worse by a pick up in economic inactivity, are driving up salaries, the benefits for workers are being swallowed up by rapidly increasing prices that are forecast to see inflation top 7% by the spring.

       On top of higher energy bills and payroll taxes, households also face the prospect of sharply rising borrowing costs, as the combination of a tight labour market and soaring inflation worries Bank of England (BoE) officials.

       Traders are expecting the BoE to hike its 0.5% benchmark rate to 2% by the end of the year.All told, households are facing the biggest decline in their disposable income for at least 30 years, according to the BoE.

       “The squeeze on firms’ finances from high inflation, soaring energy bills and the looming national insurance hike is likely to weaken job creation and further restrain pay growth in the coming months,” said Suren Thiru, head of economics at the British Chambers of Commerce.

       “With high economic inactivity indicating that many people have left the jobs market altogether, chronic staff shortages are likely to weigh on the UK economy for a sustained period.”

       The latest snapshot of the labour market from the ONS also showed the number of people on company payrolls rose 108,000 last month, although the December numbers were revised down heavily from a rise of 184,000 to an increase of 131,000.

       The unemployment rate held at 4.1% in the fourth quarter.

       Vacancies rose to a record 1,298,400 in the three months through January, although the pace of the increase slowed.

       Inactivity rose to 21.2% in the fourth quarter, contributing to labor shortages.

       The increase was partly driven by a rise in long-term sickness. — Bloomberg