UK real wages to 'fall by £50 a month'

UK real wages to 'fall by £50 a month'
The UK is facing a cost of living crisis as real wages are set to fall by £50 a month, according to the TUC. Photo: Getty

Real wages in the UK are set to fall by £50 a month, on average, this year, according to new analysis of Bank of England (BoE) figures by the Trades Union Congress (TUC) published on Friday.

The cash figure is based on a 2% decline in real earnings, with the BoE expecting inflation at 5.75% in 2022 and average earnings at 3.75%.

TUC head of economics Kate Bell said: “Hard work should pay for everyone. But real wages are set to plummet again.

“Calls for pay restraint are ill-founded and will make the squeeze on family budgets even tighter.

“As the chancellor said yesterday, energy prices are pushing up inflation — not wage demands.

“Britain needs a pay rise — not another decade of lost pay and living standards.

The TUC is calling for unions to be given more access to workplaces to negotiate better pay and conditions.

Read more: Better jobs 'top priority' for levelling up UK

The BoE has predicted real income to fall by five times the amount it did during the financial crisis of 2008, according to the projections by the monetary policy committee, which makes decisions on interest rates.

In its latest forecasts, the BoE predicted that real post-tax labour income will shrink by 2% this year, and another 0.5% in 2023.

This means workers will face the biggest hit to their take-home pay since 1990, when comparable records began.

The BoE hiked interest rates for the second time in two months on Thursday, from 0.25% to 0.5% and warned households faced the worst squeeze on disposable incomes for 30 years.

It comes after UK inflation soared to a 30-year high in the year to December thanks to rising energy costs, strong demand for goods and services, and ongoing supply chain disruption.

According to the latest data from the Office for National Statistics (ONS), it climbed to 5.4%, the highest since the early 1990s. Inflation is expected to soar to as much as 7.25% in April, when energy bills are set to rise.

The energy regulator, Ofgem, on Thursday announced it was lifting its price cap by more than 50% to just under £2,000 in response to soaring global wholesale gas prices.

Read more: NHS and other key workers face year of poor pay, TUC warns

The UK is facing a cost of living crisis as national insurance is also set to increase by 1.25 percentage points and petrol prices are up by more than a quarter in a year.

Council tax is also expected to go up, with the Institute of Fiscal Studies predicting many are likely to push up rates by close to the maximum that the government allows.

Bus and train fares are already 5.9% higher and record high inflation also means families are spending more on food, clothing, and footwear.

Watch: UK cost of living crisis: More turn to food banks in England as inflation soars