Cost of living: 18-month wage pain may have finally ended - but only for some

Wages have been growing for months now as workers seek to alleviate the impact of the cost of living crisis in any way they can, but the growth has been unequal across many sectors.

Official figures showed that average regular wages, not including bonuses, jumped 7.2% higher in the three months to April, up from 6.8% in the three months to March and higher than expected.

Despite the record surge, the Office for National Statistics (ONS) revealed pay continues to be outstripped by rising prices, with regular wages down 2.3% with Consumer Prices Index inflation (CPI) taken into account.

This means that inflation is now only 1.3% ahead of wage growth, which still means a real terms pay cut, but nowhere near as large as previous months.

The Resolution Foundation said this could mean the 18-month pay squeeze may finally have ended.

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The Resolution Foundation noted the figures showed a stark contrast between pay growth in the public and private sectors.

They noted since January 2022 wages in the private sector have been consistently increasing from around £550 a week to £600 in April 2023.

But in the public sector wage growth has plateaued, it rose steadily from January 2022 to the middle of the year before rising sharply in the final six months of 2022.

Since the start of 2023, it has barely moved, hovering around £620 a week.

The public sector has been plagued by strikes for months as workers demanded pay rises to match inflation, which the government refused to budge on.

Even in sectors that have agreed large pay rises they are still below the private sector average.

Downing Street said the government was "conscious about the potential for a wage-price spiral" and that’s why "difficult decisions" were being made about public sector pay.

While workers will be happy with the pay growth the Bank of England will be worrying.

Wage growth can often fuel inflation, which the BoE is desperately trying to curb.

Experts said the figures would raise the chances of another interest rate hike next week, with the BoE having already warned that high pay growth is one of the factors stopping inflation from easing back at a quicker pace.

This will put further pressure on homeowners as mortgage rates leap higher.

Lenders have already been pulling mortgage deals in their droves and hiking rates as financial markets now believe interest rates may need to rise from 4.5% currently to 5.5% or even higher, sparking turmoil in mortgage markets.