Jason Alden/Bloomberg via Getty Images LONDON – Real UK wages, which reflect the strength of workers’ pay after inflation, fell by an annual 3% in the last quarter, according to data released by the Office for National Statistics on Tuesday. While the average wage — excluding bonuses — rose by 4.7% in the April-June period, according to the ONS, the cost of living is rising at an even faster rate and outpacing wage growth. Darren Morgan, director of economic statistics at the ONS, said this was affecting how far wages go into workers’ everyday lives. “The real value of pay continues to decline. Excluding bonuses, it continues to decline faster than at any time since comparable records began in 2001,” he commented. Higher energy and food bills are putting pressure on UK households. The cost of living crisis continues to dominate the country, with consumer purchasing power declining. Inflation in the UK hit a new 40-year high of 9.4% in June and is expected to jump above 13% by October. The Bank of England responded to the rise in rates earlier this month by raising interest rates by 50 basis points to 1.75% – the biggest single increase in 27 years. Lauren Thomas, UK economist at careers website Glassdoor, said inflation and rising prices are currently the main concerns of workers. “The only constant in 2022 is change and soaring prices. Even with high wage growth and a tight labor market, workers are feeling the squeeze as inflation emerges as the biggest winner. With real wages falling to a record 3.0 percent thanks to inflation, the cost of living is a priority for many job seekers,” he said. The ONS figures also showed that unemployment remained steady at 3.8%, while job vacancies fell over the same period. James Smith, developed markets economist at ING, said the Bank of England would pay particular attention to both wage growth and the UK unemployment rate “Official Bank of England forecasts point to a significant rise in the unemployment rate over the next two years, but policymakers will be looking for signs that firms are ‘storing’ staff even as margins are squeezed, amid concerns about their ability to rehire again in the future. Wage growth has decent momentum at the moment and the panel will be concerned that this could be sustained,” he said. Looking ahead, this could mean further sharp rate hikes from the Bank of England, adds Smith: “At present, we believe there is little in this latest data to prevent the Bank of England from raising interest rates by 50 basis points again in September, even as we approach the end of the tightening cycle.”
