Gap between UK wages and inflation worst for 20 years

Bills have surged due to soaring energy and fuel bills, but salaries have struggled to keep up

Workers in Britain are being hit by soaring inflation.
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Britons' pay packets continue to lag heavily behind inflation, despite a slight rise in earnings.

The Office for National Statistics revealed that regular wages, excluding bonuses, plunged by 3.7 per cent over the three months to May against the rate of consumer price index inflation, representing the biggest slump in more than 20 years.

Regular pay rose slightly to 4.3 per cent for the period, without taking inflation into account.

It comes after CPI inflation hit a 40-year record of 9.1 per cent in May and is expected to reach as high as 11 per cent later this year.

Bills have surged due to soaring energy and fuel bills amid the impact of the Ukraine war, but many have seen wages struggle to keep up.

The ONS added that total salaries, including bonuses, lifted by 6.2 per cent for the three-month period, as workers in the financial sector drove bonuses.

Pressure on wages came as official figures showed that the number of UK workers on payrolls rose by 31,000 between May and June to 29.6 million.

Meanwhile, the rate of unemployment decreased to 3.8 per cent for the three-month period.

Unemployment fell as job vacancies also continued to increase, with major staff shortages in industries such as hospitality.

There were 1,294,000 job vacancies over the three months to June, representing a 6,900 rise on the previous quarter.

ONS head of labour market and household statistics David Freeman said: “Today’s figures continue to suggest a mixed picture for the labour market.

“The number of people in employment remains below pre-pandemic levels and, while the number of people neither working nor looking for a job is now falling, it remains well up on where it was before Covid-19 struck.

“With demand for labour clearly still very high, unemployment fell again, employment rose and there was another record low for redundancies.

“Following recent increases in inflation, pay is now clearly falling in real terms, both including and excluding bonuses.”

Chancellor Nadhim Zahawi said: “I am acutely aware that rising prices are affecting how far people’s hard-earned income goes, so we are providing help for households through cash grants and tax cuts.

“We’re working alongside the Bank of England to bear down on inflation, providing support worth £37 billion this financial year for the cost of living, and investing in skills to help people get into work and progress.”

Growing the economy is key, said Labour’s Pat McFadden, shadow chief secretary to the Treasury.

“Today’s record fall in real wages comes after a decade where wages have stagnated for workers across the economy," he said.

“This is because the Conservatives have failed to grow the economy, which has left people more exposed to inflation and the cost-of-living crisis.

“Labour’s number one mission in government would be to grow our economy, making the country more prosperous and making its people better off.”

Updated: July 19, 2022, 10:00 AM