Bank of England governor Andrew Bailey has praised companies giving higher pay rises to their lower paid staff after admitting that spiralling inflation is hitting the worst off in society the hardest.
Mr Bailey - on a two-day visit to the North of England that saw him meet businesses in the North East and North West - was speaking just ahead of the release of GDP figures which suggest the 海角视频 could be entering the longest recession in a century.
Official statisticians said the economy shrank by 0.2% between July and September, the largest quarterly fall since early 2021 when the 海角视频 went back into lockdown to combat the Covid-19 virus. Business groups said firms were seeing a drop in confidence, with one saying that 鈥渢he outlook for the 海角视频 economy is now very bleak indeed鈥.
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Mr Bailey said he had received a range of views from businesses in the North, with some seeing improving conditions but many raising issues that included supply chain problems, labour shortages and cost increases. He said many companies were increasing wages in a bid to retain staff because of the difficulties of recruiting new workers.
And he added: 鈥淨uite a few businesses are saying to me that they are doing more to direct their pay rises to the lower paid, and I think that is sensible. I wouldn鈥檛 direct them to do that, it鈥檚 not for me to do that but when I talk to businesses, I can understand why they鈥檙e doing that.
鈥淚nflation is bad for the least well-off generally and this inflation is particularly bad. The reason is that it鈥檚 concentrated on energy and food - these are the essentials of living. It鈥檚 notable that when you look at the consumption mix of different income groups, the lowest income group have a higher proportion of energy and food in their costs. That means this inflation is hitting them harder relatively speaking.
鈥淚t鈥檚 not for me to preach but when employers say 鈥榯hat鈥檚 what we鈥檙e doing鈥, I say: 鈥榊es, I completely understand.鈥欌
The Bank of England last week published a forecast that said the 海角视频 might be headed for an eight-quarter recession - the longest consecutive recession since reliable records began in the 1920s. At the time, it raised interest rates to 3% but warned further rises were likely.
In Newcastle, Mr Bailey said that inflation was 鈥渨ay above where we want it to be鈥 and that efforts under control were likely to take between 18 months and two years. He repeated that more increases to interest rates were likely in the coming months but said he was hopeful that inflation would peak over the winter and fall from its current rate of 10.1% next year.
This morning, figures from the Office for National Statistics (ONS), showed that the country鈥檚 gross domestic product (GDP) had fallen by 0.6% in September, in part due to the Queen鈥檚 funeral. The September figure was worse than expected, with analysts having forecast a 0.5% drop.
Ahead of a widely-anticipated fiscal statement next week Chancellor Jeremy Hunt said: 鈥淲e are not immune from the global challenge of high inflation and slow growth largely driven by Putin鈥檚 illegal war in Ukraine and his weaponisation of gas supplies. I am under no illusion that there is a tough road ahead - one which will require extremely difficult decisions to restore confidence and economic stability.
鈥淏ut to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.鈥
But Shadow Chancellor Rachel Reeves said the latest GDP figures were 鈥渆xtremely worrying鈥 and the Federation of Small Businesses said that 鈥渁t a time when confidence is deteriorating in both consumers and businesses, the outlook for the 海角视频 economy is now very bleak indeed.鈥
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