Kevin Brown

In real terms (adjusted for inflation), growth in total and regular pay fell on the year in April to June 2022 at 2.5% for total pay and 3.0% for regular pay.

The figures indicate that growth in average total pay (including bonuses) was 5.1%, and growth in regular pay (excluding bonuses) was 4.7% among employees in April to June 2022.

Average total pay growth for the private sector was 5.9% in April to June 2022, and 1.8% for the public sector. The wholesaling, retailing, hotels and restaurants sector saw the largest growth rate at 7.7%, followed by the finance and business services sector and construction sector, both at 6.3%; this was partly because of strong bonus payments.

However, bonus payments are continuing at the high levels seen over the last six months, after a slightly lower level in May 2022.

Kevin Brown, savings specialist at Scottish Friendly, said that with the country gripped by unprecedented price rises, one of the sure-fire ways for families to keep pace is through pay rises.

He said: “Unfortunately, that isn’t happening. The ONS figures show regular pay fell by 3% - factoring in current inflation figures - which means households are experiencing the biggest net fall in earnings power on record. This will likely be made even worse by rising inflation numbers tomorrow.

“Falling pay compounds two issues for households. First, their monthly costs are harder to cover as essential bills continue to rise. Secondly, it harms households’ ability to save for a rainy day and for the longer-term, through investing. The signs are there that many UK households don’t have the ability to save and invest the amounts they once did, and are resorting to debt to cover increasing spending costs. This is particularly dangerous at a time when interest rates are rising.

“For those that are still able to save at the end of the month, it’s really important to have a rainy-day fund that they can easily draw down on, and beyond that to put money to work through investing. Although savings rates are getting better, there is still a significant gap between what banks offer savers and the rate of inflation. This means your money is still losing its value as it languishes in a cash savings account.”

Martin Beck, chief economic advisor to the EY ITEM Club, added: “The labour market continued to display resilience over the summer, albeit with signs that a weaker economy is loosening things up a little. The Labour Force Survey (LFS) jobless rate of 3.8% in Q2 was 0.1ppt higher than in the first quarter, but still lower than the immediate pre-Covid rate. Employment rose 160,000, but this did not prevent the employment rate falling 0.1ppt to 75.5%. Inactivity was broadly unchanged. Meanwhile, job vacancies fell for the first time since the summer of 2020, although they were still close to a record high.

“At first sight, a deceleration in headline (three-month average of the annual rate) pay growth to 5.1% in Q2 from 6.4% in May was consistent with labour market conditions becoming less tight. In practice, the slowdown largely reflected March’s strong, bonus-driven, 9.9% single-month rise in earnings falling out of the three-month comparison. Excluding bonuses, headline pay was up 4.7% in Q2, an advance on May’s 4.4%, but falling behind CPI inflation of 9.2% in the same period.

“The average worker continuing to see their pay fall in real terms is at odds with concerns about the possibility of a wage-price spiral in the UK. And while falling real pay will have an impact on consumer demand, labour getting cheaper relative to prices and the cost of some other inputs should protect employment from the negative effects of a weaker economy. So, while the EY ITEM Club expects GDP to grow slowly over the next 12 months, the jobless rate is expected to remain below 4.5% over that period – which would be a much softer outcome compared to past economic slowdowns.”

Derek Mitchell, Citizens Advice Scotland chief executive, commented: ““This underlines the breadth of impact the cost of living crisis is having across the economy and for people.

“While this crisis is being driven by high energy prices, the impact isn’t confined to energy bills. Prices in the shops are soaring as the value of working people’s wages is falling

“We are facing a crisis this winter where people will be forced to choose between freezing and starving, we need to see radical and urgent government intervention in the scale of the pandemic or the 2008 financial crisis.”