Double shock in the United Kingdom: exit from the COVID-19 crisis and Brexit – Natixis

The United Kingdom is combining COVID-19 and Brexit, with the resulting supply difficulties and the decline in the number of workers from the EU in the UK. Looking at the figures, the UK is now "overheating", with an acceleration in wages and unit labour costs and strong pressure on the labour market, analysts at Natixis report.

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There is a risk of wage inflation in the United Kingdom

“Like other countries, the UK is affected by the rise in commodity prices, especially in energy prices, as the COVID-19 crisis ends. But Brexit has also given rise to: Supply problems (decline in road transport); A decline in the number of workers from the EU. This has created pressure on the labour market, with persistently severe hiring difficulties for companies and declining employment.”

“The figures for wages, productivity and unit labour costs are difficult to interpret given the shock of the second quarter of 2020 and the repercussions of this shock in the second quarter of 2021 when calculating YoY changes. But we can measure the trend in developments by correcting the 2021 figure for the decline in 2020. When we then look at changes in: Wages; Unit labour costs; we see an acceleration in 2021.”