Wages have jumped by the most in more than two decades thanks to employers hiring workers after the EU referendum, a study shows.
Average weekly pay increased by 5.3% in the year to April, said the ONS, more than double the rate of inflation of 2.7%.
Over the same period, wage growth in Greater London and the South East topped 20%, according to the data which adds to evidence that workers’ pay is soaring across the country. In the 20 years since its last record of this type of data, only three other periods saw annual increases of more than 4%, when the European or UK banking crisis depressed pay growth.
“The combination of tight labour market conditions and low inflation will continue to keep inflationary pressures at bay,” said David Kern, chief economist at the British Chambers of Commerce. “That is good news for economic activity and inflation pressures as we enter an economic slowdown. However, while we expect wage growth to remain high, it must slow for the economy to become more sustainable and create jobs for young people,” he added.
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While wages increased, other spending remained subdued. Motorway travel and consumer goods like supermarket food have been affected by shoppers switching to online shopping for cheaper items. This has been reflected in monthly retail sales figures, which have come in at roughly flat levels during the year after seven years of strong growth.
The lower sales were likely to make up part of the reduced earnings, economists said. But inflation did help drive pay rises as unemployment fell and households felt the extra cost of living.
Wages recorded their biggest year-on-year increase since the year to January 1997. The growth rate of 1.9% during the year to April was up from an annual rate of 1.4% recorded in March, and the largest year-on-year increase since September 2013.
Average weekly earnings for employees aged 25 to 54 rose 4.8% from April 2016 to April 2017, compared with an annual increase of 1.9% recorded in the previous year. This is expected to rise to 6.1% by 2020.
Total earnings – which include bonuses, bonuses on salaries and extra pay – rose by 3.5% in the year to April 2017, 2.1% excluding bonuses and 10.2% excluding bonuses. This is expected to rise to 4.3% by 2020.
Wages accelerated during the first three months of the year and are continuing to grow even as the labour market tightens, a Bank of England official said on Wednesday. “Over the past few years, productivity has been weak, but we are expecting to see it pick up in the coming years,” said Andy Haldane, who sits on the bank’s monetary policy committee.
He added that wages can be expected to grow at a faster rate than inflation because “the situation is not going to improve over the coming year”.