UK pay packets grew at fastest pace in a decade over three months to October, official data shows

Regular pay in October 3.5 per cent higher than last year

UK average weekly earnings rose at an annual rate of 3.3 per cent in the three months to October, official data on Tuesday showed.

The 3.3 per cent figure is the fastest growth rate on this measure since July 2008, just beating the previous peak post-recession rate of 3.2 per cent registered in April 2015.

The latest figure was well ahead of the expectation among City of London analysts for a 3 per cent rise.

The data will likely reassure the Bank of England in its analysis that inflationary wage pressure is building in the economy as slack in the labour market is used up, something that prompted the BoE to increase interest rates to 0.75 per cent in August.

The increase was partially due to a large jump in bonuses in October, which were up 18.1 per cent on the same month a year earlier.

But regular pay was also 3.5 per cent higher than October last year.

UK workers have seen their real pay severely squeezed once again by inflation, in the wake of the 2016 Brexit vote.

But on the latest data real average weekly earnings are rising by 1.1 per cent, the fastest since December 2016.

Fastest in a decade

However, the nominal rate of pay growth is still below the pre-recession growth rates. Between 1998 and 2007 the average rate of nominal pay growth was 4.25 per cent.

And the latest indications are that the economy is slowing ahead of Brexit, which may leave employers more inclined to keep a lid on pay rises.

The governor of the Bank of England, Mark Carney, has warned that wages are likely to drop in the event of a no-deal Brexit.

“The earnings data will fuel Bank of England confidence that pay growth is now on a firming trend amid labour market tightness. Nevertheless, the Bank of England still looks highly unlikely to raise interest rates again until after the UK leaves the EU in March 2019 given the major uncertainties over a Brexit ‘deal’ that are occurring in the run-up to the UK’s departure,” said Howard Archer of the EY Independent Treasury Economic Model Club.

“Current evidence of a slowing economy is also likely to reinforce Bank of England caution over raising interest rates in the near term.”

Ruth Gregory of Capital Economics said: “We remain confident that, provided a Brexit deal is secured, [there will be] a further rise in real earnings to spur a recovery in consumer spending growth next year. However, if there is a no-deal Brexit, we estimate a hit of between 1 and 3 percentage points to consumer spending growth in 2019.”

The Office for National Statistics also reported on Tuesday that the jobless rate was unchanged at 4.1 per cent.

Total employment rose by 79,000 in the three months to October, taking the employment rate to 75.7 per cent, equal to the record high seen in April.