UK regular pay rises at fastest rate seen outside of pandemic

Regular pay in the UK grew more than expected in the final three months of last year, but real pay kept falling, according to data released on Tuesday by the Office for National Statistics.

The unemployment rate was stable at 3.7% in December, while annual wage growth rose by 6.7% in the period between October and December, up from 6.5% and ahead of expectations for it to remain flat. The ONS said this was the fastest rate of growth seen outside of the pandemic.

Taking into account inflation, however, this marked a 2.5% decline.

Growth in average total pay including bonuses was 5.9%, down from 6.5%. Taking into account inflation, this was a 3.1% decline. "This is smaller than the record fall in real total pay we saw in February to April 2009 (4.5%), but remains among the largest falls in growth since comparable records began in 2001," the ONS said.

The number of people in employment rose by 74,000 in the period between October and December to 32.8m, taking the employment rate to 75.6%, up 0.2 percentage points.

The data showed that 843,000 working days were lost in December because of strike action, which is the highest since November 2011.

It also showed that in November 2022 to January 2023, vacancies fell by 76,000 on the quarter to 1,134,000, marking the seventh consecutive quarterly fall since May to July 2022.

"The fall in the number of vacancies reflects uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment," the ONS said.

Capital Economics said: "December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth.

"The Bank of England will be increasingly concerned about the persistence of domestic inflationary pressures as private sector wage growth (excluding bonuses) exceeded its forecast. This supports our view that the Bank of England will have to raise interest rates from 4.00% now to a peak of 4.50% in the coming months."