UK inflation: workers see real-terms pay cut of up to £150 a month - how wages in your area compare

Real terms pay is down in every part of the country compared with last year, NationalWorld can reveal, as inflation hits a historic high of 9%.

Spiralling food and energy prices mean that people in parts of the country are effectively earning as much as £153 per month less than this time last year.

Why are wages down in real terms?

Average earnings in April across the UK were around 3% less in real terms than the previous year, an analysis of Pay as You Earn (PAYE) data from the Office for National Statistics (ONS) by NationalWorld has found.

This means the average worker is down £66 per month in real terms, compared with last year. The figures refer to employees only, with salaries for self-employed people excluded.

This real-terms drop in wages across the board comes despite increases to the National Living Wage (NLW) and national minimum wage in 2021, as well as an extension of eligibility for the NLW to include 23 and 24 year olds, when previously it only applied to over 25s.

Since the financial crisis in 2008, wages have more-or-less flatlined in the UK, with real-terms wage growth between 2010 and 2020 the lowest over any ten year period in peacetime since the early 19th century.

Our interactive map below reveals how big a pay cut workers in every part of the UK have had.

Can’t see the map? Click here to open it in a new browser.

Though the Covid recovery period did show brief signs that this trend could be set to change, price increases and stalling real-terms wage growth in recent months now suggest otherwise.

According to the ONS, the rate of inflation as measured by the Consumer Price Index (CPI) hit 9% in April 2022, the highest since 1989.

This has largely been driven by increasing wholesale energy prices, and the knock-on effect of these on production costs.

This high rate of inflation is only likely to increase in coming months, with a further uplift in energy bills expected in October, leading the Bank of England to predict CPI could reach 10.5% before the end of the year.

The effect on households, particularly when set against below-inflation wage growth, could be disastrous, particularly for those on low-incomes.

The problem is particularly acute for households which rely to some extent on welfare, as state benefits were only uprated by 3.1% in April.

The Institute for Fiscal Studies (IFS) has warned that the poorest 10% of households, who spend a higher proportion of their income on gas and electricity, currently face an even higher rate of inflation, around 10.9%.

Heidi Karjalainen, a research economist at the IFS, said this will result in “big real-terms cuts to the living standards of many of the poorest households”.

She said: "Continuing pressures, such as the war in Ukraine, are likely to push Ofgem’s October tariff cap, as well as other prices including food prices, even higher later this year. We are likely to be in a prolonged period during which poorer households are facing rates of inflation even higher than the headline figures would suggest."

Which areas have seen the biggest drop in real-terms earnings?

Wales and Scotland have seen a disproportionate rate of wage stagnation compared with the rest of the UK. Wages there dropped by 4.4%, in real terms the worst for any region.

Of the 25 areas where real-terms wages have dropped the most, 15 are in Scotland, compared with five each in Wales and England.

In Angus and Dundee City wages are down 6.1% compared with last year, meaning a drop in earnings of £127.

In monetary terms, average wages fell the most in Camden and the City of London, with a real-terms drop of £153 (4.8%), followed by Tower Hamlets, at £140 (4.9%).

Wages in Mid Ulster in Northern Ireland have held up the best,  with wages down 0.9% since last year, equating to a net loss of £18.

The Government has said that global factors are driving inflation and warned that it “cannot protect people completely” from the resulting increases in the cost of living.

There are growing calls for an emergency budget ahead of the next scheduled energy cap rise in October, while Labour has called for a windfall-tax on energy companies which have posted record profits.

In a statement, the chancellor Rishi Sunak said: “Countries around the world are dealing with rising inflation. Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.

“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.

“We’re saving the average worker £330 a year through reducing National Insurance Contributions, changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.”

Should wages go up in response to rising inflation?

Some economists have suggested that increasing wages at the same level as inflation, alongside measures to legally limit the cost of certain goods, such as energy, could provide a workable solution to rising costs, which are driven primarily by external factors.

However, the Bank of England’s governor, Andrew Bailey, has called on workers not to push for large wage increases as a result of the cost of living crisis, over concerns this could fuel further inflation.

Though he later suggested that he had been primarily referring to high-earners, his comments attracted pushback from trade unions, who have been calling for further support for workers to help with the cost of living.

Part of the Bank of England’s response to the crisis has been to increase interest rates, in hopes that this will discourage borrowing and spending.

But rising interest rates could have a particularly detrimental effect on low and medium earning households with significant levels of consumer and mortgage debt.

Responding to the latest CPI figures, Unite general secretary Sharon Graham said: “The alarm bells are ringing very loudly now. Earnings are being pummelled, the Government is, shamefully, turning its back on those in need and employers are squeezing wages. So, we will absolutely take no more lectures on pay restraint from the millionaire governor of the Bank of England.

“If Andrew Bailey wants to lecture anyone about belt-tightening, he should direct his attention to the CEOs of the UK’s top 100 companies who have seen their wages swell by an average of 34% to an astonishing £4.1 million a year. Ask them to pause to reflect about the scale of their corporate greed.”