UK workers take a pay cut as inflation outpaces wage rises, official figures show

Average pay growth hits 4.3% but fails to keep up with soaring cost of living

<p>(Philip Toscano/PA)</p>

(Philip Toscano/PA)

UK workers took a pay cut in the final three months of last year as the soaring cost of living outstripped wage increases, official figures show.

Latest data from the Office for National Statistics made grim reading for British households, who face the biggest squeeze on living standards in decades.

Total pay growth rose to 4.3 per cent for the quarter to December – from 4.2 per cent for the three months to November – but continued to lag behind inflation, which surged to a near 30-year high of 5.4 per cent in December, propelled by huge increases in energy and fuel costs.

Economists expect inflation to spike further to around 7 per cent by April when millions of households will be hit with a 54 per cent jump in their energy bills. Borrowers face a further squeeze after the Bank of England raised interest rates this month, with further hikes predicted.

Some of the pain is likely to be cancelled out by rising wages, with early estimates indicating employers were beginning to increase salaries in response to rising inflation.

Workers’ bargaining power is being boosted by staff shortages in a number of industries. Total vacancies rose to another record of 1.3 million between November and January, the ONS said.

“The good news is that the UK economy is continuing to create jobs,” said Matthew Percival, director for people and skills at the CBI.

“The bad news is that businesses are struggling to hire and pay is failing to keep up with inflation.”

The total number of people in work dipped by 38,000 in the latest quarter, although the number of payrolled employees rose by 108,0000 to 29.5 million.

The unemployment rate remains low at 4.1 per cent which is only fractionally above the pre-pandemic level. However, there are around half a million fewer people in work than there were before the pandemic, due to a large decline in the number of self-employed workers

Officially, unemployment only refers to people who are out of work and actively seeking a job. It does not include people who are “economically inactive” – those who aren’t working and are not looking.

The proportion of economically inactive people rose slightly to 21.2 per cent.

Chancellor of the exchequer Rishi Sunak said: “Our £40bn economic plan has protected our jobs market through the pandemic and it is now healthier than most could have hoped for.

“Payrolled employee numbers are at a record high and redundancies are at an all-time low thanks to our plan for jobs.

“We're continuing to help more people into work and are providing support for the cost of living worth over £20bn across this financial year and next.”

Sam Beckett, head of economic statistics at the ONS, said: “The number of employees on payrolls rose again in January 2022 and is now well above pre-pandemic levels.

“However, our Labour Force Survey shows the number of people in employment overall is well below where it was before Covid-19 hit.

“This is because there are now far fewer self-employed people.

“The survey also shows that unemployment has fallen again and is now only fractionally above where it was before the pandemic.”

Pat McFadden, Labour’s shadow chief secretary to the Treasury, added: “These figures confirm working people still face a fragile recovery in the face of a growing cost of living crisis and spiralling inflation.

“Twelve years of the Conservatives’ record means working people today will not only be paying more in tax under the Conservatives but face heating bills rocketing, prices rising and falling real wages.”

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in