Wages in UK have grown at their fastest rate in more than 20 years, but are still failing to keep up with inflation. Average pay rose by 6.4% between September and November compared with the same period in 2021, according to the Office for National Statistics (ONS). It means that wages are growing at their fastest rate since records began in 2001.
However, when adjusted for inflation, average pay fell in real terms by 2.6%. The chancellor Jeremy Hunt said the figures showed that despite global economic challenges, “the UK labour market remains resilient with a record number of employees on payrolls”. He added that he was committed to halving inflation this year - currently running at 10.7% - which would help people’s wages go further.
“Wages have risen at an unprecedented pace outside the pandemic period, piling pressure on the Bank of England to up interest rates again next month,” said Myron Jobson, senior personal finance analyst at interactive investor. The consultancy Capital Economics believes the Bank could hike rates from their current level of 3.5% to 4.5% in the coming months.
In terms of public sector versus private sector pay, the gap has fallen slightly, but remains close to a record high. Average pay growth for the private sector was 7.2% in three months to November, versus 3.3% in the public sector. This will likely fuel more pay demands from public sector employees, and more industrial action as workers go on strike.
Workers should also brace themselves for a wave of redundancies. Faced with high inflation, many businesses have absorbed rising costs wherever possible, but there are signs that some are starting to let staff go, or are reducing their hours. Unemployment and redundancy numbers have edged up slightly, according to the ONS.