British workers are in line for a 0.5pc pay squeeze next year as inflation stays ahead of earnings – making the UK the worst performing developed economy in 2018.

Real pay is set to grow by 2pc in Ireland, 1.8pc in Italy, 1pc in the US, 0.8pc in Germany and 0.7pc in France, according to recruitment group Korn Ferry’s study of firms employing 20m workers across 97 countries.

But Britain is one of just 10 where prices will outstrip pay, putting the UK in the company of nations including Finland, Nigeria and the UAE.

British households are anticipating a slowdown in pay, with growth slowing from 2.3pc this year to 2.1pc next year, a Bank of America Merrill Lynch survey found.

Workers’ satisfaction increases rapidly when their pay rises by more than 2pc, BAML found, indicating that the slowdown in earnings growth may hit consumer confidence next year.