UK unemployment rate down, but living standards slip

UK is headed for a fifth year of falling living standards, with official figures showing average earnings growth slipping last year from 1.7 per cent to 1.4 per cent.

However, unemployment is down and the number of people in work surged to a record level in the three months to last November, but employers held back pay hikes.

Economists warned that with inflation at 2.7 per cent and likely to stay above 2 per cent, workers cut back on spending as they faced a squeeze on their finances that would see more distressed retailers and restrict the economy's recovery.

Plans from Lloyds Bank and regional airline Flybe to shed over 1,200 jobs served to underline the gloomy projections. With the closure of HMV, Comet and Jessops coupled with a sharp downturn in manufacturing in recent months, the government is braced for figures tomorrow that are expected to show the UK halfway towards a triple-dip recession.

Lloyds came in for sharp criticism from unions, which said the lender had announced 1,300 job cuts in the past few days and a quarter of its workforce since 2009.

Ministers welcomed the unemployment figures, as they also showed a further dip in the numbers claiming jobseeker's allowance.