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UK earnings growth remains weak

Friday June 4th 2010

Experts are warning that weak earnings growth across the UK hints at "testing times" ahead for households, highlighting the need for income protection insurance to protect mortgage payments.

New figures show take-home pay only rose by an average of 0.5% last month, its lowest level for six years.

Payments processor VocaLink's take-home pay index fell 3% last month, with pay growth in the services sector falling 0.4% to 0.3%, while manufacturing rose 6% to 2.2%.

The index has now hovered below 2% for the past year, falling below 1% since February, reflecting weak earnings growth, particularly since the start of this year.

"With consumer price inflation greater than or equal to 3% between January and April, income growth has clearly not been keeping up with the expansion in prices, causing real income growth to remain weak. The average UK household has therefore seen levels of discretionary income diminish during 2010," said the report.

Marion King, chief executive officer at VocaLink, said: "Over the year to date, the average growth level of the VocaLink Take Home Pay Index has been just 0.8%, compared to 2.9% over the same period in 2009.

"The Index shows real income growth remaining weak, particularly in the services sector which is using excess capacity to service initial increases in demand as the economy gradually recovers. The figures continue to point towards testing times throughout the rest of the year for the average UK household."

Copyright © Press Association 2010

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