Britain’s year-long pay squeeze is over as wages rose by 2.8pc, overtaking price rises for the first time since January 2017.

Inflation fell to 2.7pc in February, meaning families are becoming better off in real terms.

At the same time unemployment fell to a new low of 4.2pc as employment increased by another 55,000 in the three months to February.

“The labour market continues to be strong, and for the first time in almost a year, earnings have grown slightly after inflation has been taken into account,” said Matt Hughes at the Office for National Statistics.

“Employment rose again in the three months to February, to reach its highest ever rate since records began. The unemployment rate fell, too, and is at its lowest since 1975.”

This is a sharp turnaround from the pay squeeze of the past year - at its worst in May, consumer prices rose 2.9pc while earnings were up just 1.9pc, leaving family finances suffering.