Britain’s pay growth has crashed to its lowest level in over half a decade, according to fresh figures from the Office for National Statistics, raising alarms over a sudden economic slowdown and mounting financial strain on workers.
The Office for National Statistics confirmed today that average weekly earnings, excluding bonuses, climbed just 2.1% compared with a year earlier, the weakest increase since August 2019. That marks a dramatic fall from the peak of 5.8% recorded in October-December 2022, when a post-pandemic hiring frenzy drove wages sharply higher.
Key Points
- ⚠️ Pay growth drops to 2.1% — lowest since 2019
- 📉 Fall from 5.8% peak in late 2022 highlights rapid cooling
- 💰 Real wages now trail inflation, squeezing household budgets
Economists warn the slowdown reflects a broader labour market correction, with job vacancies falling for 23 consecutive months and unemployment inching up to 4.2% in June. Firms, battered by high interest rates and waning demand, are cutting back on recruitment and freezing pay rises instead of awarding inflation-matching increases.
📋 By The Numbers
- 2.1% — Current regular pay growth (June 2024)
- 4.2% — June unemployment rate, up from 3.8% in March
- 23 — Consecutive months of declining job vacancies
The Bank of England has held interest rates at 5.25% since November, a move aimed at taming inflation which, while easing, remains above the 2% target at 3.2%. Governor Andrew Bailey warned last month that wage pressures were easing but stressed that persistent inflation in services could derail progress toward rate cuts. “We’re seeing the labour market soften, but pay growth is still too high to declare victory,” he said.
| Sector | Pay Growth (June 2024) | Change from 2023 |
|---|---|---|
| Healthcare | 3.4% | -1.1% |
| Manufacturing | 2.7% | -1.8% |
| Hospitality | 1.8% | -3.2% |
| Finance | 2.5% | -0.9% |
Public sector workers saw the steepest decline, with pay rises dropping to 2.3% from 4.5% a year earlier, as government departments enforce austerity-style pay caps. In contrast, private sector wages grew 2.2%, down from 6.3% in late 2022, though still outpacing public sector increases.
💡 Pro Tip
Workers considering job changes should scrutinise inflation-adjusted salary offers, as nominal pay rises may not cover rising living costs.
The squeeze is most acute in regions already hit by industrial decline and high housing costs, such as the North East and Yorkshire and the Humber, where pay growth lags the national average by 0.4%. London and the South East remain relative outliers, with wage growth of 2.6% and 2.4% respectively, though still down from peaks above 4% in 2022.
- 📊 Real wages have fallen 1.1% over the past year when adjusted for inflation
- 🔍 Services inflation remains stubborn at 5.7%, driven by wage-heavy sectors
- ⚠️ 1.3 million workers on zero-hours contracts face the greatest financial uncertainty
Trade unions have criticised the government for failing to link public sector pay to inflation, warning of strikes in key services. “This isn’t just a pay freeze — it’s a real-terms pay cut,” said Unite’s general secretary Sharon Graham. “Workers are being forced to choose between heating and eating.”
- Sharpest fall — Hospitality sector pay growth drops 3.2% year-on-year
- Public sector squeeze — Pay rises slashed from 4.5% to 2.3%
- Regional divide — North East wages lag behind London by 0.5 percentage points
With the general election looming, all major parties have pledged to address the cost-of-living crisis, though concrete policies remain vague. The Treasury insists the labour market is normalising after post-pandemic distortions, but families across Britain are already tightening belts, with retail sales falling for a fourth straight month in July.
