Brexit supporters have admitted they’ll accept economic damage to leave the European Union, but it may be hitting closer to home than they would like.
According to the Bank of England, the decision to leave is now a factor in the weak wage growth that’s plagued U.K. workers since the recession. While lackluster productivity has played a large part for years, now companies are worried about losing free and direct access to a major market. And they may not be willing to fork out more money as a result.
In its latest quarterly analysis of the economy, the BOE said the recent weakening in wage growth even with unemployment at a four-decade low could be “volatility in the data.” Or it could be something else:
“It might also reflect some employers being less willing to commit to higher basic pay levels until they have more certainty over future demand for their output or the path of non-labor costs.”
Earlier this week, a survey by YouGov Plc showed 61 percent of 2,043 voters who backed splitting from the EU in the 2016 referendum view “significant economic damage” as a “price worth paying.” However, support was only 39 percent if it meant them or a family member losing their job.
BOE Governor Mark Carney offered a gloomy assessment of Brexit on Thursday, saying it’s weighing on consumers and companies’ investment decisions, and is the biggest factor in the outlook for the economy.
The BOE also cut its forecasts for growth this year and next, and said expansion will remain “sluggish” in the near term. It sees 0.3 percent growth this quarter, matching the pace of the previous three months.
At a press conference dominated by the exit from the EU, Carney was also asked about what it means for workers.
“There is an element of Brexit uncertainty that is affecting the wage bargaining. A potentially material number of firms are less willing to give bigger pay rises given it's not as clear what their market access is going to be over the next few years.”