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Real Wage Rise Waiting Game

Written By On 07/02/2014

The National Institute of Social and Economic Research revised their November UK economy growth prediction from 2 per cent to 2.5 per cent for 2014.

The well known think tank say that there's a possibility of reaching 3 per cent if the UK's property market carries on growing like it has been recently. They anticipate 2.1 per cent growth for next year, also a revised figure which was previously 1.9 per cent. They forecast the same growth of 2.1 per cent for 2016.

The report follows yesterday's meeting where the Monetary Policy Committee announced interest base rates will remained unchanged at 0.5per cent, the same as it has been for almost five years.

The NIESR also forecast that the jobless total will tumble below the Bank's original 'forward guidance policy' target of 7 per cent at some time during 2014.

The independent economic research institute are expecting wages to take at least five years to get to the same point we were at before Britain experienced serious financial problems.

Britons are increasing their spending due to decreasing unemployment and property prices going up which all adds to the UK economy. Even the construction market is starting to move in the right direction.

However, business investment is still a worry along with wage increase in comparison to inflation.

The NIESR believe interest rates will start increasing between March and June of 2015, quite a few months after unemployment breaches the 7 per cent threshold.

But the institute is concerned about the UK's poor productivity and compares it to Italy. Principle research fellow Simon Kirby said:

In the long run, rising standards of living can only occur through improved productivity. If we do not see this materialise we may well continue to see this downward trend in real consumer wages and it does put at risk somewhat the recovery we are expecting to happen over the next few years .