Record wage growth across the UK adds to inflation worries

After taking inflation into account, average pay including bonuses fell by 1.2%

The Office for National Statistics figures will likely to add to the Bank of England's inflation worries. Getty Images
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British wages excluding bonuses were 7.3 per cent higher in the three months to May than a year earlier, matching the highest growth rate on record, according to official figures.

Average regular wages were the same as during the previous three months and the joint highest since records began in 2001.

The Office for National Statistics figures will likely add to the Bank of England's inflation worries.

However, there were also some signs of a loosening in the labour market as Britain’s unemployment rate rose above expectations.

The ONS said the UK jobless rate jumped to 4 per cent for the three months to May, from 3.8 per cent in the previous three-month period, driven by long-term unemployed.

Economists had predicted a 3.8 per cent in the latest quarter.

Inflation in the UK remains at 8.7 per cent, causing the Bank of England's Monetary Policy Committee at the end of June to raise interest rates for the 13th time in the current cycle to 5 per cent.

Adjusted for inflation, growth in total and regular pay fell on the year in March to May 2023, by 1.2 per cent for total pay and 0.8 per cent for regular pay.

The number of job vacancies in April to June 2023 was 1,034,000, a decrease of 85,000 from January to March 2023.

The economic inactivity rate decreased by 0.4 percentage points on the quarter, to 20.8 per cent from March to May 2023.

There were 128,000 working days lost because of labour disputes in May 2023, the lowest number of days lost since July 2022.

ONS director of economic statistics Darren Morgan said: “Total employment grew in the latest three months while the number of people actively looking for work also increased, both driven by men rejoining the labour market.

“Pay excluding bonuses has again risen at record levels in cash terms.

“Due to high inflation, however, the real value of weekly earnings are still falling, although now at its slowest rate since the end of 2021.”

Chancellor Jeremy Hunt said: “Our jobs market is strong with unemployment low by historical standards.

“But we still have around one million job vacancies, pushing up inflation even further.

“Our labour market reforms – including expanding free childcare next year – will help to build the high-wage, high-growth, low-inflation economy we all want to see.”

Meanwhile, the slump in deal making cut pay for investment bankers at almost every level of seniority in London last year.

The highest tier of vice presidents made 13 per cent less, and all but the most junior associates saw their total compensation fall, according to a survey of about 250 bankers by global recruitment consultancy Dartmouth Partners.

While base salaries generally continued to rise, bonuses were slashed as staff shared in a smaller pool of deal fees. The Mergers and acquisitions slowdown continued into this year, resulting in a wave of redundancies across multiple countries.

Remuneration for UK-based bankers at Goldman Sachs Group – the best-paying investment bank in 2021 – fell the hardest in 2022, with associates’ total compensation down 28 per cent and vice president pay falling almost 25 per cent.

Updated: July 11, 2023, 8:59 AM