'Zero real wage growth' forecast for 2018

The UK's pay squeeze will end next year, but a meaningful rise in wages remains out of sight, an influential research group has warned.

The Resolution Foundation, which campaigns for fair pay, predicted inflation would no longer outpace wage growth by the end of 2018.

But it said real wage growth would still be flat and that many households were pessimistic about their finances.

The Treasury said it was "helping families to earn more".

The Office of Budgetary Responsibility (OBR), the government's economic watchdog, projects that when the full figures for 2017 are confirmed they will show that wages have fallen by 0.4% in real terms as inflation has soared to more than 3%.

The squeeze, caused by the fall in the pound since the Brexit vote, has contributed to weaker consumer spending and a slowdown in the housing market.

The Resolution Foundation, which based its outlook on OBR data, said the trend would worsen in the first few months of next year before levelling out.

This would result in "zero real wage growth" in 2018 - an improvement on 2017, but worse than any year in the three decades leading up to the financial crisis.

Torsten Bell, director of the research group, said 2017 had been "a tough year for living standards".

"The good news is that things will get better next year. The bad news is we may only go from backwards to standing still, with prospects for a meaningful pay recovery still out of sight."

Referencing Bank of England data, the research group added that 27% of working age households thought their financial positions would worsen in the coming 12 months - roughly the same as those who think it will get better.

However, it noted the lowest paid workers were set for a pay rise of 4.3% in April as the National Living Wage reached £7.83.

Overall, it said UK workers would not see a "noticeable" pay rise until December 2018.

A Treasury spokeswoman said: "We are helping families to earn more and keep more of what they earn. Our National Living Wage is delivering the fastest pay rise for the lowest earners in 20 years and we are cutting taxes for millions of people."