Last reviewed 27 November 2023

Real earnings are expected to be lower in 2023 on average than in 2006 as a result of high inflation combined with long-term productivity challenges.

This is among the main findings of the November UK Economic Outlook produced by PricewaterhouseCoopers (PwC) which highlights that inflation will remain above the Bank of England’s target both this year and next.

“The labour market continues to run hot, with regular pay growing by 7.8% in cash terms in the three months to August 2023,” the Outlook states. “However, the story is radically different once taking a longer term view and adjusting for inflation.”

The report, which can be found here, is sub-titled “Not Out of the Woods Yet” and it predicts that the UK economy will grow by around 0.5% in 2023 and 2024.

The TUC takes a similarly depressing view of long-term pay in its response to the latest figures from the Office for National Statistics (ONS). It argues that, if pay packets had been growing at pre-crisis levels, workers would be on average nearly £15,000 better off than they are today.

Independent think tank, the Resolution Foundation, has also examined pay growth noting that, over the past three months, annualised private sector pay growth has almost halved from 10.5% to 5.8%.

While headline nominal regular average weekly earnings grew by 7.7% on the year (down on the previous months but still high by historic standards), it points out that real earnings grew by just 1.3%.