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Average UK pay rises stall at 4% – less than half the inflation rate

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Annual pay growth stalled at 4% in May, leaving most workers with a rise in earnings worth less than half the 9% increase in prices.

Figures from XpertHR, a pay and personnel data publisher, said employer pay deals for the three months to May failed to increase on April’s median 4%, undermining concerns that workers would push for inflation-busting rises in earnings that could start a wage-price spiral.

The report follows a Bank of England business survey that showed employers surveyed in May were not planning a further acceleration in pay rates.

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XperHR said May’s 4% rise was the highest since 1992, when the consumer prices index (CPI) measure of inflation hit a high of 7.1% before falling to below 3% later in the year.

Sheila Attwood, the firm’s pay and benefits editor, said: “Despite pay awards reaching record levels not seen for 30 years, any marginal increases we are seeing are outstripped by the sheer pace of inflation.”

A letter on Friday sent to Boris Johnson by 67 economists said there was no wage-price spiral under way in Britain and keeping wages down would risk pushing the economy into a recession.

Coming at the end of the financial year, deals registered in April and May account for a large number of pay agreements between employers and workers, mostly at medium and large organisations.

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Stephen Machin, a professor at the London School of Economics, said the survey and official figures from the ONS, which showed pay rises averaging 4.2% across all sectors, revealed workers lacked the bargaining power to push up wages to match inflation.

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“Bargaining power in the private sector has been especially weak in the 12 years since the financial crash. And the public sector has suffered even more, with pay deals below the equivalent agreements in the private sector,” he said.

Employers often used bonuses and one-off payments to alleviate the financial pressure on employees, he added, and this could be a tactic used increasingly by employers to support staff through the worst of the inflationary period.

The engineering firm Rolls-Royce has offered up to 70% of staff a £2,000 one-off payment to “to help them through the current exceptional economic climate”.

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“It will be interesting to see what happens in the current round of bargaining in the public sector, though even the train drivers are not asking for an inflation-plus wage rise,” Machin said.

British rail workers began their biggest strike in 30 years on Tuesday in protest at pay freezes and job cuts. The RMT union, which represents a large proportion of the 50,000 railway workers, has asked for a 7% pay rise.

Other unions have warned of a “summer of discontent” if teachers and nurses, which are expected to be offered 3% this year, successfully ballot for industrial action.

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