[ 2015-01-17 ]

Tumbling oil prices: ‘Give Britain a pay rise’
David Cameron: 'I want to see companies’ success
passed through in terms of wage increases'.
The sectors enjoying the biggest boost from cheap
oil are farming, transport, retail and
manufacturing

London (UK) – 17 January 2015 – The Times -
British workers should be given pay rises by
companies enjoying windfall profits from tumbling
oil prices, David Cameron has said.

The prime minister announced that he wanted
companies in Britain, which have seen profits hit
a 16-year high in recent months, to pass on the
success to their employees.

Asked during his White House visit yesterday
whether he would encourage companies to increase
pay, Mr Cameron said: “Obviously I want to see
companies’ success passed through in terms of
wage increases. It has to be done in a way
that’s affordable, and in a way that companies
can continue to grow [and] we need to see
productivity increase.”

Mr Cameron and Barack Obama discussed the effect
of falling prices amid fears that it could cause
global instability. The US president, who has made
raising pay a key theme of his leadership, heaped
praise on his “good friend” at the end of a
two-day visit and delivered what will be taken as
a pre-election endorsement.

“We must be doing something right,” said Mr
Obama when asked if Britain should stick to its
economic policies, pointing out that it “stood
out” as being among the few leading nations
registering strong growth.

With the election in four months the prime
minister focused on the benefits for Britain’s
economy and its biggest trading partners. Evidence
of wage growth together with falling inflation,
driven in the main by reduced petrol prices, would
help the Conservatives to neutralise Labour’s
attacks over stagnating living standards.

Wages have not gone up for years since the
financial crash, but living costs have continued
to rise. The absence of pay increases meant that
the average worker was about £5,000 worse off
last year compared with 2008, according to one
study.

Pressed specifically on whether companies should
share the oil dividend with their workers, Mr
Cameron said: “Falling oil prices are going to
benefit a lot of businesses and a lot of countries
and we want to see those benefits passed through
in all the ways they can be.”

This week’s profitability figures reflect the
start of a slide in oil prices, which fell from a
high of $115 a barrel in June to about $96 a
barrel by the end of September. Further falls to
just over $45 a barrel since then suggest that
profits will have been shown to have soared still
higher in the final quarter of last year and the
start of this year.

The sectors enjoying the biggest boost from cheap
oil are farming, transport, retail and
manufacturing, according to the ONS.

Howard Archer, a European and UK economist at IHS
Global Insight, said that profits could drive up
wages as well as lead to the creation of jobs and
increased investment. However, business groups
warned that workers and politicians should not
expect wage rises across the board as a result of
the fall in oil prices.

Mike Spicer, director of research at the British
Chambers of Commerce, said: “For many companies,
energy is a major component of their cost base.
Though wholesale oil prices are volatile and
currently falling, the prices businesses pay are
usually subject to long-term contracts.

“When energy prices fall, individual companies,
not politicians, will be best placed to determine
how to manage that change.”

James Sproule, chief economist at the Institute of
Directors, added that businesses should not be put
under pressure to make “long-term decisions on
the basis of what could be a temporary blip”.

“When companies are gifted with a short-term
cash boost, there are many options open to
them,” he said. “The prime minister is right
to point out that lower oil prices will benefit
companies. Some businesses will think about
raising wages. However, for others, the right
answer may be to lower prices, bring forward
investment, pay off debts, or take on more
staff.”

One potential downside of the falling oil price is
that European nations are under less pressure to
reduce their dependence on Russian supplies. The
US president and the prime minister are understood
to have agreed to continue working to ensure that
the EU builds up alternatives to reduce the
leverage of President Putin.

Ed Miliband, the Labour leader, will use figures
showing that wages fell below inflation for most
of the last parliament to make the claim that most
people have yet to feel the benefits of economic
recovery.

However, real earnings are finally likely to rise
this year. The independent Office for Budget
Responsibility said last month that household
incomes were likely to grow 1.7 per cent.

Boris Johnson, the mayor of London, is urging the
Conservatives to take the lead in driving up low
wages.

Mr Cameron showed signs of warming to that theme
yesterday, adding: “Companies that can afford to
pay the living wage should — it’s good and
helps to reduce the welfare bill.”

Source - The Times(UK)

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