UK Wages Drop at Fastest Rate on Record

According to the ONS, total pay in July including bonuses fell 2.5% and regular pay fell 3.0%

Alliance News 16 August, 2022 | 10:11AM
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The UK unemployment rate was steady in June, figures on Tuesday showed, but while wages grew faster than expected, real pay has dropped at the steepest pace on record.

The UK unemployment rate was 3.8% in the three months to June, unchanged from the three months to May, according to the Office for National Statistics. A year earlier, the unemployment rate had sat at 4.7%.

The latest figure was in line with FXStreet-cited consensus.

Wage growth figures, meanwhile, came in above expectations. Regular pay, so excluding bonuses, was 4.7% higher annually in the three months to June, accelerating from 4.4% in the three months to May. The figure topped FXStreet cited consensus of 4.5% growth.

Including bonuses, wage growth was 5.1% year-on-year, beating a forecast of 4.5% growth. However, this marked a slowdown from May's growth of 6.4%.

That means UK earnings by both measures continue to lag consumer price inflation, which ran at an annual rate of 9.4% in June.

In real terms - meaning adjusted for inflation - total pay fell 2.5% and regular pay fell 3.0%.

Darren Morgan, ONS director of economic statistics, said: "The real value of pay continues to fall. Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001."

UK inflation figures for July are due on Wednesday, with CPI expected to come in at 9.7%, from 9.4% in June. The Bank of England forecasts that inflation will break through 13% this year, before falling back to the target of 2%.

Paul Craig, portfolio manager at Quilter Investors, said June's wage growth will be "little comfort" for workers given the real terms pay cut.

"While Andrew Bailey won't want to see pay rising too quickly, we are headed for a difficult winter where some parts of the population will be struggling with energy bills and the cost of food. If inflation continues on its trajectory to the forecasted 13% this is only going to exacerbate the situation further. The pay demands we have seen in the public sector of late are only going to get louder," said Craig.


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