Wages in the UK are set to rise above inflation for the first time in eight years. With inflation at a current low of 0.1% and forecast to drop further and wages reported to have increased at 2.7% between February and April (source the ONS) this will be the first ‘real’ growth in wages that the UK workforce has experienced in eight years. The increase is also significantly higher than forecast.
It will no doubt be welcome news for most people as for the first time in almost a decade people will actually start to feel as though they have more money.
Wages have been falling in real terms since 2010 and have in fact fallen 10% since the start of the decade so whilst it is great news that average earnings are on the rise there is still a long way to go. However we are unlikely to see a return to the sort of salary increases we were accustomed to prior to the recession. People are delaying retirement and working ‘til later in life, this coupled with immigrant workers means the UK workforce is growing, this is likely to hold back more rapid growth in wages in most sectors. The exception to this could be in areas of significant skills shortages.
The rise in wages may not be as high as we’ve seen in the past but with low inflation workers will certainly feel the benefit of more cash in their pay packets and with a decrease in unemployment and a strengthening pound the overall picture for the UK economy is undoubtedly looking brighter.
