UK WAGE growth ground almost to a halt in the three months to February, official figures have revealed, as a leading economic think-tank warned of the risk to the Scottish economy from weak labour market activity north of the Border.

Average weekly earnings, including bonuses, grew by just 0.2 per cent over the period after inflation is taken into account, the Office for National Statistics (ONS) said. Nominal wages grew by 2.3 per cent but the rise was all but completely wiped out by rising inflation, underlining the pressure which has faced households caused by price increases since last June’s Brexit vote.

The latest Consumer Prices Index, published by the ONS on Tuesday, showed inflation grew by 2.3 per cent in March, in line with February and again ahead of the Bank of England’s two per cent target.

Analysts warned wages will begin to fall in real terms amid expectations inflation will continue to rise in 2017.

Oliver Kolodseike, senior economist at the Centre for Economics and Business Research, said the latest labour market data signals “workers are facing a renewed squeeze on their incomes from rising inflation and subdued wage growth with real incomes failing to rise.”

He added: “The squeeze on household finances is set to intensify during the year with the combination of rising consumer prices and weak wage growth set to act as a headwind to purchasing power.”

Noting CEBR expects consumer spending growth to more than half in real terms to 1.2 per cent this year from 2.8 per cent in 2016, Mr Kolodseike added: “The consumer spending

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boom which has propelled the UK economy forward in recent years may therefore come off the boil in 2017.”

UK unemployment held broadly steady at a 4.7 per cent, close to a 12-year low, with the rate falling to 4.5 per cent in Scotland. But David Eiser of the University of Strathclyde’s respected Fraser of Allander Institute warned that “falling unemployment in Scotland reflects a rise in inactivity rather than a rise in employment.”

He explained: “While unemployment among those aged 16-64 has fallen by 46,000 over the year, employment has fallen by 12,000. Economic inactivity – that is, people not in work and not seeking work - has risen by 60,000.

“Secondly, unemployment and employment figures tend to lag the performance of the economy by several quarters. The labour market implications of Scotland’s relatively weak growth in GDP - and GDP per head - during the latter part of 2016 may yet to have fully fed through to today’s labour market statistics.”

Mr Eiser added: “The performance of the labour market is important primarily because it influences the incomes and therefore wellbeing of Scottish households. But with revenues from income tax now devolved to the Scottish Parliament, a weak labour market will feed through to weaker tax revenue growth for the Scottish Government.”