Jobs data show workers face rising costs and static pay, and no indication of Brexit vote triggering exodus of EU labour

This article is more than 3 years old

This article is more than 3 years old

The vast majority of employment growth was driven by non-UK nationals in the final three months of 2016 compared with a year earlier, the latest official figures on the labour market revealed.

Of the 303,000 more people in work between October and December compared with a year earlier, 233,000 were non-UK nationals, taking the total to 3.48 million according to the Office for National Statistics. UK nationals working in Britain increased by 70,000 over the same period to 28.44 million.

Over the past two decades, the number of non-UK nationals working in Britain has increased by more than a million, taking the proportion of the workforce from 3.8% to 10.9%, partly reflecting the expansion of the EU as new member states were admitted.

The figures are likely to be seized upon ahead of the Stoke-on-Trent and Copeland by-elections next week. Both constituencies voted decisively for Brexit in the EU referendum last June.

Labour market expert John Philpott said there was little sign of an “exodus” of EU workers following the Brexit vote. “The level of EU-born people working in the UK was more or less flat in the second half of last year. While this may suggest the UK is no longer the draw it once was for EU migrants, Brexit has yet to trigger a big EU labour exit.”

The latest jobs report also revealed that Britain’s workers are struggling to get pay rises despite record levels of employment, with commentators warning that UK families are facing the prospect of a fresh squeeze in living standards over the next year.

Pay growth excluding bonuses slowed unexpectedly to 2.6% between October and December, from 2.7% between September and November, despite a record employment rate of 74.6% and a labour market that is “edging towards full capacity” according to the ONS.



Real pay growth of 1.4% was the slowest in two years, as the gap narrows between inflation – which is rising – and the rate of wage increases.

Missing wage rises give lie to picture of full employment | Larry Elliott Read more

Frances O’Grady, TUC general secretary, said: “With prices rising faster, real pay growth is now slowing down. This will be worrying for families whose have still not seen their living standards recover following the financial crisis. Next month’s budget must set out a clear plan for preventing another fall in living standards.”

James Smith, economist at ING, said the latest report would “ring alarm bells” for consumers.

Fuel and food prices pushed up the headline inflation rate from 1.6% in December to 1.8% in January, the highest in more than two years.



Inflation is expected to reach about 3% over the next 12 months as the sharp fall in the value of the pound since the Brexit vote drives up the cost of goods imported from abroad.

Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “The encouraging news on jobs isn’t feeding through into earnings, which have shown no sign of responding to fast-rising inflation. Unless this changes Britain is set for a fresh pay squeeze later this year.”

The number of people in work rose by 37,000 the final quarter of 2016 compared with the previous quarter, to 31.8 million. The employment rate among women hit 70% for the first time since records began in 1971.

The chancellor, Philip Hammond, tweeted: “Encouraging labour market stats out today; record high employment rate and youth unemployment at its lowest level for more than 12 years.”

Philip Hammond (@PHammondMP) Encouraging labour market stats out today; record high employment rate and youth unemployment at its lowest level for more than 12 years

The unemployment rate remained unchanged at an 11-year low of 4.8% between October and December, with the number of people out of work falling by 7,000 to 1.6 million.

In January, the number of people claiming jobless benefits fell unexpectedly by 42,000 to 745,000. Economists had predicted a small rise of 800.

Debbie Abrahams, Labour’s shadow work and pensions secretary, welcomed the rise in employment but said it was worrying to see that rising living costs were catching up with wage growth.

“If this trend continues, the government’s abysmal record on living standards will get even worse,” she said. “With wages set to be lower in 2021 than before the Tories came to power, they must now act to stop the growing pressure on low and middle income families.”