Incomes remain outpaced by inflation, finds ONS, despite 7% annual rise in average pay

Average incomes have risen by 7% on last May but payrises remain outpaced by inflation, according to the latest earnings data released by the Office of National Statistics (ONS).

Based on real-time earnings of PAYE taxpayers, estimates for May 2023 indicate that median monthly pay in the UK stands at £2,240, an increase of 7.0% compared with the same period of the previous year. The sharp rise in earnings has been in-part explained by the recent increase in the National Living Wage which now stands at £10.42 per hour.

Employment figures also released by the UK’s statistics agency show modest rises in the employment rate across the UK, with 0.2% more Brits in work than in the first quarter of 2023. In the North-west, this rises to 1%, with the North-east seeing the highest growth in employment (2.5%) over the past three months.

Despite the rise in the size of employee pay packets, with high inflation persisting (the latest ONS figures estimating annual inflation to currently stand at 8.7%), price rises are continue to outpace income growth. The ONS estimates that a typical UK worker will now be earning 1.3% less than in May 2022 in real terms given the rate of price rises over the past year.

The Bank of England has repeatedly warned that continued wage growth is helping to drive up inflation and have raised the prospects of the UK’s central bank increasing interest rates yet again when its Monetary Policy Committee meet next week.

Writing for the BBC News website, the broadcaster’s Economics Editor, Faisal Islam, has reported that financial markets expect the Bank of England base rate to exceed 5% in the coming weeks, with a 0.5 percentage point rise increasingly likely on Thursday 22nd June as a result of the ONS latest earnings data. The ONS’s most up-to-date inflation data for May is also scheduled to release on 21st June, which will further inform any Bank of England decision on interest rates.