Wages rise but fail to keep up with inflation

Regular pay has grown at the fastest rate in more than 20 years, but is still failing to keep up with rising prices, official figures show.

Pay, excluding bonuses, increased at an annual pace of 6.7% between October and December 2022, the Office for National Statistics (ONS) said.

The ONS said the increase was the strongest growth seen outside of the Covid pandemic.

However, when adjusted for inflation, regular pay fell by 2.5%.

The gap between private and public sector pay continued, the ONS said, with private regular pay up 7.3% annually between October and December, compared with a 4.2% rise in the public sector.

But both figures are being outstripped by the rising cost of living, with inflation – the rate at which prices are rising – running at 10.5%.

The rise in energy and food prices has put a squeeze on household finances and the Bank of England has forecast that the UK will enter a recession this year.

The ONS also said that 843,000 working days were lost to strike action in December, which was the highest number since November 2011.

The total number of strike days from June to December 2022 was more than 2.4 million, the highest total for a calendar year since 1989. There is no ONS data on the number of strike days from February 2020 to May 2022.

Thousands of workers have gone on strike in recent months over pay and working conditions, with postal workers, rail workers and nurses all taking industrial action.

Darren Morgan, director of economic statistics at the ONS, said the transport and communications sectors were the “most heavily affected”, but added health worker strikes also contributed to the lost working days in December.

The UK’s unemployment rate remained unchanged at 3.7%, the ONS figures showed.

Chancellor Jeremy Hunt, who has warned the UK is “not out of the woods” despite it narrowly avoiding a recession last year, said unemployment remaining close to record lows was “an encouraging sign of resilience in our labour market”.

“The best thing we can do to make people’s wages go further is stick to our plan to halve inflation this year,” he said.

But Rachel Reeves, Labour’s shadow chancellor, said the UK’s economy was “stuck in the slow lane”.

“We must bring in urgent measures to prevent yet more harm from the cost of living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets,” she said.