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GDP Per Head 5.8% And Pay 13.8% Down

Monday, March 10, 2014

BCC Forecast Of GDP Recovery To Pre-Recession Levels In 2014 Gives Wrong Impression For Workers Say GMB

GDP per head in 2013 was 5.8% below 2007 level and the real value of pay was down nearly 14% so it will be some time yet before GDP per head in the UK recovers to pre-recession levels says GMB.

GMB took issue with the impression given by the forecast released today (10th March) by the British Chamber of Commerce (BCC) which says that UK GDP will exceed pre-recession peak earlier than expected in 2014. See notes to editors 1 for copy of release with BCC forecast.

Last week GMB released a new study showing that GDP per capita in 2013 at £23,894 was 5.7% below the 2007 figure of £25,326.This fall in GDP per head is the root cause of the 13.8% drop in the real value of average earnings of all employees in employment between April 2008 and November 2013 in the UK.

These figures were from a new analysis by GMB of official data for GDP and average earnings since the start of the recession.

The figures for changes in GDP per capita in the UK are set out in Table 1 below. The figures are expressed at 2013 prices to adjust for inflation. The data for average earnings is set out in notes to editors 2 below.

Table 1 CHANGE IN UK GDP PER CAPITA SINCE 2007

 

Gross Domestic Product:  Seasonally adjusted £m

GDP per capita

Index 2007=100

%change on 2007

2007

1,552,989

25,326

100

 

2008

1,541,039

24,926

98.4

-1.6

2009

1,461,361

23,472

92.7

-7.3

2010

1,485,616

23,672

93.5

-6.5

2011

1,502,216

23,737

93.7

- 6.3

2012

1,505,993

23,640

93.3

-6.7

2013

1,532,431

23,894

94.3

-5.7

Paul Kenny, GMB General Secretary, said "This BCC forecast gives the wrong impression. While growth and the recovery is welcome it is GDP per hear which is the measure that counts for workers and their families.

The BCC are careful in their forecasts. However the way it is reported gives an impression that GDP per head will pass its pre- recession level this year. Sadly this is very wide of the mark.

GDP per head in 2013 was 5.8% below 2007 level and the real value of pay is down nearly 14% It will be a while yet before GDP per head in the UK recovers to pre-recession levels.

The reality is that hard pressed working people across the UK are struggling to pay their bills after years of wage decline and attacks on the living standards of families throughout the land.

Working people deserve and need a decent pay rise to halt the drop in living standards.”

End

Contact: Kamaljeet Jandu, GMB National Equality and Diversity Officer on 07956 237178 or Brian Strutton, GMB National Secretary on 07860 606137 or Gary Doolan, GMB National Political Officer on 07852 182358 or Martin Smith, GMB National Organiser on 07974 251722 or GMB Press Office 07921 289880 or 07974 251823.

Notes to Editors:

1 BCC forecast

UK GDP to exceed pre-recession peak earlier than expected in 2014, says BCC

The British Chambers of Commerce (BCC) has today upgraded its growth forecasts for the next two years – from 2.7% to 2.8% in 2014 and from 2.4% to 2.5% in 2015.

BCC upgrades GDP growth forecasts from 2.7% to 2.8% in 2014 and from 2.4% to 2.5% in 2015

UK GDP expected to exceed its pre-recession peak in Q2 2014 – one quarter earlier than we forecast in December

The first increase in UK interest rates expected in Q3 2015 to 0.75%

BCC predicts that wage growth will exceed inflation from mid-2014

The youth unemployment rate is expected to remain almost three times the national average over the forecast period (2014 – 2016)

The British Chambers of Commerce (BCC) has today (Monday) upgraded its growth forecasts for the next two years – from 2.7% to 2.8% in 2014 and from 2.4% to 2.5% in 2015. For 2016 (included in our forecast for the first time) we are expecting growth of 2.5%.

The Q1 2014 Economic Forecast conveys increasing business optimism, with GDP expected to exceed its pre-recession peak in Q2 2014 – a quarter earlier than we predicted in December 2013.

John Longworth, BCC Director General, says that the economy is ‘gaining momentum’ and pays tribute to businesses across the UK that have fought hard to grow and create jobs. However, Mr Longworth also warns that major issues remain as the economy still faces long-term challenges despite recent progress.

ECONOMIC FORECAST - OVERVIEW

The BCC is raising its GDP growth forecast to 2.8% in 2014 and to 2.5% in 2015. The upgrades for 2014 and 2015 are mainly due to upward revisions to historic GDP data by the ONS. For 2016 (included in our forecast for the first time) we are expecting growth of 2.5%.

GDP is likely to exceed its Q1 2008 pre-recession peak in Q2 2014 – one quarter earlier than we predicted in December 2013.

UK GDP quarterly growth is forecast at 0.7% in Q1 2014, easing slightly to 0.6% in Q2 2014, before averaging 0.6% per quarter until the end of 2016.

The main contributors to UK GDP growth in the next three years will be household consumption and output from services.

After reaching 2.4% in 2013, growth in household consumption will continue at 2.4% in 2014, and will edge up to 2.5% in 2015 and 2016.

Service sector outputis forecast to record growth of 2.9% in 2014, 2.7% in 2015, and 2.7% in 2016.

BCC expects the unemployment rate to fall from 7.2% in Q4 2013 to 6.0% in Q4 2016. The youth unemployment rate (16-24 year-olds) will remain close to three times the national average, falling from 19.9% in Q4 2013 to 17.8% in Q4 2016.

Business investment is expected to record strong growth of 6.6% in 2014, 5.7% in 2015, and 5.7% in 2016. Even so, business investment in 2016 will still be slightly lower than in 2008.

We are predicting that the first increase in official UK interest rates will be in Q3 2015 to 0.75% – one quarter earlier than previously forecast. We expect this will be followed by modest increases in 0.25% steps to reach 1.50% in the second half of 2016.

Commenting, John Longworth, Director General of the British Chambers of Commerce (BCC), said:

“Our economic recovery is gaining momentum. Businesses across the UK are expanding and creating jobs, and our increasingly sunny predictions for growth are a testament to their drive and ambition. Our new forecast shows that the service sector is performing particularly well, and is likely to be a key driver of growth. And the manufacturing sector, although small, is pulling its weight too, and will play an important role in sustaining our recovery.

“But it’s not time to break out the champagne glasses just yet. Major issues remain, such as the unacceptably high level of youth unemployment. We urge the Chancellor to use this month’s Budget wisely by incentivising businesses to hire young people so that the next generation of workers are not left behind.

“Crucially, Britain is simply not investing enough. While business investment is expected to grow, it will remain way below pre-crisis levels for some time. There is also more to do in securing access to finance for growing firms – as this too will be crucial to securing our economic future. So is getting public and private sector funding together to address the crippling gaps in our transport, digital and energy infrastructure.

“We just hope that as the General Election gets closer, politicians are not tempted to abandon a drive for long-term economic security in favour of short-term vote winners. No government over the next decade can afford to get distracted – and our leaders must do everything in their power to ensure the economy goes from being merely good, to being truly great.”

David Kern, Chief Economist at the BCC, added:

“The upgrades to our growth forecasts are largely due to revisions to historic GDP data by the ONS. The good news is that GDP growth is expected to remain well above 2% for the next three years, and is likely to exceed its pre-recession peak in the second quarter of 2014 – a quarter earlier than we predicted in late 2013. This shows that the economy is on the right track, but we mustn’t be fooled into thinking that it is back up to full strength just yet.

“The UK’s current account deficit remains excessive, and without a stronger rebalancing towards net exports, we could face serious risks to our long term economic health. In addition, while business investment is set to pick up, it is still far behind our pre-crisis peak. If we are to better this, we need higher productivity. What’s more, businesses will only increase their capital if the current environment of low inflation and low interest rates persists.

“The revamped forward guidance policy goes some way to easing business concerns, and the long-term security will encourage them to invest. However some MPC members seem to be signaling early interest rate rises. This kind of unhelpful speculation will only prevent business from investing and put pressure on an already strong pound, which could put the recovery at risk.”

OTHER ELEMENTS FROM WITHIN THE FORECAST

Main components of demand

We are expecting household consumption to grow by 2.4% in 2014, before edging up to 2.5% in 2015 and 2016. The new forecasts are lower than in Q4, reflecting the sharp slowdown in Q4 2013.

We forecast business investment to record relatively strong positive growth of 6.6% in 2014, 5.7% in 2015, and 5.7% in 2016. However business investment in 2016 will still be lower than in 2008, both in absolute terms and as a proportion of GDP.

The trade balance: the overall trade deficit is now smaller than before the financial crisis, largely due to trade surpluses in the services sector. The total trade deficit is forecast to fall from 1.6% of GDP in 2013 to 1.0% in 2016.

Main sectors of the economy

Total industrial output is forecast to grow by 1.5% in 2014, 1.1% in 2015 and 1.2% in 2016.

Manufacturing output is unchanged from our previous forecast, with expected growth of 2.0% in 2014, 1.4% in 2015. We are predicting manufacturing output of 1.4% in 2016.

Construction output is expected to grow by 4.0% in 2014, 3.0% in 2015, and 2.8% in 2016.

The services sector, the long-standing driver of the economic recovery, is forecast to grow by 2.9% in 2014, 2.7% in 2015, and 2.7% in 2016 – slightly stronger than anticipated GDP growth.

Unemployment and productivity

We forecast that the unemployment rate will fall from 7.2% in Q4 2013 to 6.8% in 2014, 6.4% in Q4 2015 and 6.0% in Q4 2016.

We are expecting UK unemployment to fall from 2.3 million in Q4 2013, to 2.2 million in Q4 2014, to 2.1 million in Q4 2015, and to 2 million in Q4 2016 – a net overall fall if 330,000 over the next three years.

We expect youth unemployment (people aged 16-24) will fall from 917,000 (a jobless rate of 19.9%) in Q4 2013 to 818,000 (a jobless rate of 17.8%) in Q4 2016, a modest fall but still far too high.

Productivity: over the next three years we forecast that output per worker is expected to increase in total by 3.4% and output per hour by 2.8%. This will still be marginally below its Q1 2008 level.

Public finances

UK public finances: the forecast outlined by the OBR in the December 2013 Autumn Statement is realistic in predicting steady falls in borrowing, but their timetable is slightly too ambitious.

While the OBR is forecasting that the UK would reach a small budget surplus in 2018/19, we feel that this would take one-two years longer.

Inflation

In annual average terms, we are forecasting annual CPI inflation to be 2.0% in 2014, 2.0% in 2015, and 2.0% in 2016. In Q4 2013 we predicted 2.5% in 2014 and 2.3% in 2015.

Official interest rates

We expect the first increase in UK official interest rates to occur in Q3 2015 to reach 0.75% - one quarter earlier than previously envisaged in the last forecast.

Further modest increases can then be expected, in 0.25% steps, to reach 1.50% in the second half of 2016.

Ends

2 GMB press release 5th March 2014

13.8% FALL IN REAL VALUE OF AVERAGE EARNINGS DURING RECESSION CAUSED BY DROP IN UK GDP PER HEAD WITH 2013 STILL 5.7% BELOW 2007 OFFICIAL DATA SHOWS

People are struggling to pay their bills after years of wage decline and attacks on the living standards and they deserve and need a decent pay rise to halt the drop in living standards says GMB

GDP per capita in 2013 at £23,894 was 5.7% below the 2007 figure of £25,326.This fall in GDP per head is the root cause of the 13.8% drop in the real value of average earnings of all employees in employment between April 2008 and November 2013 in the UK.

These figures are from a new analysis by GMB of official data for GDP and average earnings since the start of the recession.

The figures for changes in GDP per capita in the UK are set out in Table 1 below. The figures are expressed at 2013 prices to adjust for inflation. In Table 2 are set out mean gross annual earnings in £s for residents in UK and regions between 2008 to 2013.

Table 1 CHANGE IN UK GDP PER CAPITA SINCE 2007

 

Gross Domestic Product:  Seasonally adjusted £m

GDP per capita

Index 2007=100

%change on 2007

2007

1,552,989

25,326

100

 

2008

1,541,039

24,926

98.4

-1.6

2009

1,461,361

23,472

92.7

-7.3

2010

1,485,616

23,672

93.5

-6.5

2011

1,502,216

23,737

93.7

- 6.3

2012

1,505,993

23,640

93.3

-6.7

2013

1,532,431

23,894

94.3

-5.7

According to the Annual Survey of Hours and Earnings (ASHE) in April 2008 the mean gross annual earnings for all employees in employment in the UK was £26,137. The ASHE figure for the mean gross annual earnings for all employees in employment in the UK for April 2013 was £27,174. This is an increase of £1,037 or just 4%. Between April 2008 and November 2013 inflation has been 17.8%. This means the drop in real value of earnings between April 2008 and November 2013 has been 13.8% for the UK.

The drop in the real value of average earnings between April 2008 and November 2013 for all employees in employment resident in London has been 20.4% the largest drop of all 12 regions in the UK. Next is Yorkshire and The Humber with a drop of 15.4 %, followed by South East and the East Midlands 14.4%, East of England 13.8%, South West 13.7%, North West 13.4%, Wales 12.5%, Northern Ireland 12%, West Midlands 10.5%, Scotland 9.9% and North East 8.6%.

Table 2 below sets out the official data for mean gross annual earnings for UK, GB, England and all 12 regions in the UK for all employees in employment resident in the areas ranked by GMB by largest to smallest drop in the real value of earnings between April 2008 and November 2013.

The full details for the 20 worst affected areas in the UK for the drop in average earnings are set out in Notes to Editors 6. 

The GDP and earning data was published by Office for National Statistics – see notes to editors for sources and definitions. The raw data for earnings for 200 areas in the UK plus the GMB regional press releases are set out as pdfs at the foot of the national release at GMB website www.gmb.org.uk .

 

Table 2 MEAN GROSS ANNUAL EARNINGS IN £s FOR RESIDENTS IN UK & REGIONS 2008 TO 2013

 

 

Mean gross annual (£) - all employees

 

 

 

 

 

2008

2013

£ Change

% Change

% Drop in real value of earnings between April 2008 & November 2013*

 

United Kingdom

26,137

27,174

1,037

4.0

-13.8

 

Great Britain

26,351

27,332

981

3.7

-14.1

 

England

26,864

27,737

873

3.2

-14.6

Rank

 

 

 

 

 

 

1

London

37,759

36,781

-978

-2.6

-20.4

2

Yorkshire & The Humber

23,227

23,790

563

2.4

-15.4

3

South East

29,944

30,958

1,014

3.4

-14.4

4

East Midlands

24,128

24,949

821

3.4

-14.4

5

East of England

27,385

28,477

1,092

4.0

-13.8

6

South West

23,406

24,375

969

4.1

-13.7

7

North West

23,522

24,561

1,039

4.4

-13.4

8

Wales

21,944

23,110

1,166

5.3

-12.5

9

Northern Ireland

21,333

22,563

1,230

5.8

-12.0

10

West Midlands

23,035

24,725

1,690

7.3

-10.5

11

Scotland

23,934

25,830

1,896

7.9

-9.9

12

North East

21,463

23,435

1,972

9.2

-8.6

*inflation rate between April 2008 and November 2013 is 17.8%

Paul Kenny GMB General Secretary said “These alarming figures show how hard pressed working people across the UK are struggling to pay their bills after years of wage decline and attacks on the living standards of families throughout the land.

Working people deserve and need a decent pay rise to halt the drop in living standards.”

End

Contact: Kamaljeet Jandu, GMB National Equality and Diversity Officer on 07956 237178 or Brian Strutton, GMB National Secretary on 07860 606137 or Gary Doolan, GMB National Political Officer on 07852 182358 or Martin Smith, GMB National Organiser on 07974 251722 or GMB Press Office 07921 289880 or 07974 251823.

Notes to editors:

1Source: GDP United Kingdom National Accounts, The Blue Book, Office for National Statistics, Source: Population data, Midyear population estimates, National Population projections - Office for National Statistics.

2          Source: 2008-2013 Annual Survey of Hours and Earnings - residence based for all employee jobs. Source: Table 8.7a, Annual Survey of Hours and Earnings, Office for National Statistics. Crown Copyright Reserved.

3          The Annual Survey of Hours and Earnings (ASHE) is based on a 1% random sample of employee jobs (approximately 181,000 employees) taken from HM Revenue and Customs PAYE records. Information on earnings and hours is obtained from employers and treated confidentially. It covers all employee jobs in all industries and occupations across the whole of the United Kingdom. In 2013 information related to the pay period which included 17 April.

4          ASHE analyses for annual earnings relate to employees on adult rates of pay who have been in the same job for more than one year. ASHE does not cover the self-employed or the armed forces nor does it cover employees not paid during the reference period.

5          Further details are available here: http://www.ons.gov.uk/ons/rel/ashe/annual-survey-of-hours-and- earnings/2013-provisional-results/stb-ashe-statistical-bulletin-2013.html#ta
b-background-notes.

6          THE 20 AREAS IN THE UK WHERE AVERAGE EARNINGS HAVE DROPPED MOST BETWEEN 2008 AND 2013

 

 

Mean gross annual (£) - all employees

 

 

 

 

 

2008 £

2013 £

£ Change

% Change

% Drop in real value of earnings between April 2008 and November 2013*

1

Hammersmith & Fulham

65,452

44,963

-20,489

-31.3

-49.1

2

Camden

52,570

45,807

-6,763

-12.9

-30.7

3

Haringey

33,164

30,189

-2,975

-9.0

-26.8

4

Greenwich

37,871

35,242

-2,629

-6.9

-24.7

5

Warrington

28,366

26,607

-1,759

-6.2

-24.0

6

Sheffield

24,075

22,605

-1,470

-6.1

-23.9

7

Windsor & Maidenhead

42,436

39,932

-2,504

-5.9

-23.7

8

Harrow

31,888

30,026

-1,862

-5.8

-23.6

9

Buckinghamshire

37,118

35,228

-1,890

-5.1

-22.9

10

Blackpool

18,541

17,647

-894

-4.8

-22.6

11

Hartlepool

24,416

23,307

-1,109

-4.5

-22.3

12

Portsmouth

22,850

21,840

-1,010

-4.4

-22.2

13

Perth & Kinross

25,327

24,257

-1,070

-4.2

-22.0

14

Bromley

42,757

41,131

-1,626

-3.8

-21.6

15

Southwark

39,121

37,767

-1,354

-3.5

-21.3

16

Oldham

22,291

21,531

-760

-3.4

-21.2

17

Richmond upon Thames

48,016

46,456

-1,560

-3.2

-21.1

18

Scottish Borders

24,158

23,413

-745

-3.1

-20.9

19

Swindon

26,100

25,297

-803

-3.1

-20.9

20

Walsall

21,774

21,110

-664

-3.0

-20.9

 

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