August 16, 2023

Wages in the UK have surged at an unprecedented annual rate during the period between April and June, as revealed by fresh data from the Office for National Statistics.

The figures indicate that regular pay saw an impressive growth of 7.8%, marking the highest annual expansion rate since comparable records were initiated in 2001.

Despite a slight easing in inflation, which measures the rate of price escalation, it remains relatively elevated at 7.9%.

However, according to Darren Morgan, the ONS’s Director of Economic Statistics, the recent data suggests that “real pay is recovering.”

Morgan noted that basic pay “is growing at its fastest since current records began.” When coupled with lower inflation, this recovery in real pay positions seems more favorable compared to a few months earlier.

Nonetheless, wage growth has yet to outpace the velocity of price increases. Morgan clarified that real pay growth, when accounting for inflation, “is still falling a little.”

The figures demonstrate that, considering the Consumer Prices Index (CPI) measure of inflation, average regular pay saw a decrease of 0.6%.

Upcoming inflation statistics are anticipated to reveal a slowdown in price growth during July.

Simon French, the Chief Economist at Panmure Gordon, forecasted that inflation could potentially drop to 7% or even 6.8%. Nonetheless, this remains significantly higher than the Bank of England’s target of maintaining inflation at 2%.

The robust growth in wages implies that the Bank of England could potentially increase interest rates once again in September, from the present rate of 5.25%.

Within the ONS’s data, there are indications that the UK employment market is showing signs of easing. The unemployment rate rose from 4% to 4.2%, and the number of employed individuals declined.

Ruth Gregory, Deputy Chief UK Economist at Capital Economics, noted that the fall in employment and the rise in the unemployment rate are seen as signals that labor market conditions are cooling.

While these trends persist, Gregory expects the Bank of England to raise its key interest rate to 5.5%, continuing its ongoing series of rate hikes.

In the UK job market, the number of vacancies experienced a decline of 66,000 between May and July. However, there still remain over one million job vacancies.

Candice Mason, owner of Masons Minibus & Coach Hire, highlighted the challenge of finding sufficient candidates to fill vacancies. She mentioned that the situation has been “dire,” with many operators struggling to adequately staff their companies.

The company has increased wages to attract employees to cover shifts left vacant due to individuals opting for a better work-life balance after Covid-related lockdowns. Yet, this move has created a greater recruitment gap, as Mason remarked, “It honestly has just been relentless since we came out of lockdown. It is the most difficult part of the business at the moment.”

Source: BBC
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