(Bloomberg) -- UK real wages finally returned to their peak just before the financial crisis almost two decades ago, a boost to Keir Starmer’s new Labour government that has pledged to improve living standards.
They grew 3.2% in the three months to May compared to a year earlier, the fastest pace since 2021, as pay increases outstripped inflation, data from the Office for National Statistics showed on Thursday.
On average workers earned £642.90 ($835.74) a week excluding bonuses in May, just above the inflation-adjusted level in August 2007. The milestone is the latest sign that the cost-of-living crisis that battered household finances is fading, with Labour promising a further improvement.
The new prime minister said that a blitz of legislation unveiled at the King’s Speech on Wednesday aimed to boost living standards for workers and revive Britain’s sluggish growth rates.
The figures also underscore the dire gains in living standards for workers since the financial crisis hobbled the UK economy and was compounded by Brexit, the pandemic and high inflation.
Real wages were higher during the pandemic when the loss of lower-paying jobs skewed the data, but quickly fell back.
However, economists cautioned that the rapid increases in pay are another complicating factor for the Bank of England as it considers whether to cut interest rates next month.
“Rising real wages are good news for workers coming out of the cost-of-living crisis,” said Greg Thwaites, research director at the Resolution Foundation. “But the Bank of England will be concerned that because these are not productivity-enhanced pay rises, they could turn out to be inflation-generating ones.”
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