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Workers in UK face record pay slump against surging inflation

Archive image of a Job Centre Plus. Official figures also showed that the number of UK workers on payrolls rose by 73,000 between June and July to 29.7 million. Meanwhile, the unemployment rate increased to 3.8% for the quarter compared with 3.7% for the previous period. Photo by Philip Toscano/PA

By Henry Saker-Clark and Rod Minchin, PA

UK workers saw their pay lag behind inflation at record levels over the past quarter, according to official figures.
The Office for National Statistics (ONS) said regular pay, excluding bonuses, grew by 4.7% over the three months to June.

Analysts had predicted that wages would increase by 4.5%.

It comes after CPI inflation hit a new 40-year record of 9.4% in June and is expected to peak at around 11% later this year, after the invasion of Ukraine accelerated rises in energy and fuel bills.

The ONS said this resulted in a 4.1% drop in regular pay for employees once CPI inflation is taken into account, representing the biggest slump since records began in 2001.

The gap between the size of pay increases and wider inflation has contributed to a flurry of union action in recent months, with further train and Tube strikes due to take place this week.

Latest data also highlighted a continued disparity between pay growth in the public and private sectors.

Total pay, which includes bonuses, grew by 5.9% over the quarter to June in the private sector but only 1.8% for public sector employees.

Workers in retail, hospitality and restaurants saw the sharpest pay increases, at an average of 7.7%, as employers have hiked wages in a bid to solve staff shortages.

Official figures also showed that the number of UK workers on payrolls rose by 73,000 between June and July to 29.7 million.

Meanwhile, the unemployment rate increased to 3.8% for the quarter compared with 3.7% for the previous period.

ONS director of economic statistics Darren Morgan said: “The number of people in work grew in the second quarter of 2022, whilst the headline rates of unemployment and of people neither working nor looking for a job were little changed.

“Meanwhile, the total number of hours worked each week appears to have stabilised very slightly below pre-pandemic levels.

“Redundancies are still at very low levels.

“However, although the number of job vacancies remains historically very high, it fell for the first time since the summer of 2020.”

Vacancy numbers hit 1.274 million over the three months from May to July, slipping by 19,800 in the first signal the UK’s hot labour market could be cooling.

Chancellor Nadhim Zahawi said: “Today’s stats demonstrate that the jobs market is in a strong position, with unemployment lower than at almost any point in the past 40 years – good news in what I know are difficult times for people.

“This highlights the resilience of the UK economy and the fantastic businesses who are creating new jobs across the country.”

During a visit to the Nationwide Building Society headquarters in Swindon, Labour leader Sir Keir Starmer said the fall in pay against the rising cost of living was placing “further pressure on so many families, so many working people”.

“This wage stagnation has been going on for 10 years,” he said.

“So I really understand just how people are struggling, and it’s one of the reasons that we announced our energy price freeze yesterday to keep those bills down and to make the choice that the oil and gas companies in the North Sea should pay a windfall tax to help people who are struggling through this winter period.”