Why Brexit has led to falling real wages in the UK

The United Kingdom has not yet left the European Union and the long-term economic effects of Brexit remain unknown. However, one of the trends which has attracted attention so far is a drop in real wages for UK workers, which many economists have put down to the immediate depreciation of the pound after the referendum and a subsequent rise in the cost of imports. Simon Wren-Lewis explains that the picture is more complex than this, and that UK firms are anticipating a decline in the terms of trade following Brexit by not allowing nominal wages to rise to compensate for higher import prices.

ESO: Background information: Cost of No Deal (The UK in a Changing Europe, July 2017) http://www.europeansources.info/record/cost-of-no-deal/

ESO: In Focus: Brexit - The United Kingdom and the European Union http://www.europeansources.info/record/brexit-the-united-kingdom-and-the-european-union/

The Independent, 17.05.17: Brexit latest: Real wages falling, Office for National Statistics reveals http://www.independent.co.uk/news/business/news/brexit-inflation-real-wages-negative-office-for-national-statistics-a7739981.html

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