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Wage growth climbs to 10-year high

by: Paloma Kubiak
  • 13/11/2018
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Average pay continues to rise as wage growth rates hit their strongest in 10 years, strengthening expectations the Bank of England will raise interest rates next year.

In the three months to September 2018, average weekly earnings increased by 3.2% excluding bonuses, and by 3% including bonuses.

In real terms (adjusted for inflation), wages increased by 0.9% excluding bonuses and by 0.8% including bonuses, compared to a year earlier.

The figures from the Office for National Statistics (ONS) show average pay stood at £524 per week, up from £510 per week a year earlier. Taking into consideration inflation, the figures stood at £493 and £490 respectively.

Depending on the outcome of Brexit, experts suggested the data could signal an increase to the Bank of England base rate next year.

Sarah Coles, personal finance analyst at Hargreaves Lansdown said: “The question is whether this will feed through into inflation, and if it does, whether it will force the Bank of England to raise rates faster than had been anticipated.

“We’re unlikely to see major rate hikes while so much uncertainty remains over Brexit. However, the two or three rises pencilled in for the next couple of years are now increasingly likely to come to fruition.”

Ed Monk, associate director for personal investing at Fidelity International, added: “This is exactly the pre-Christmas boost the UK needed.

“It has long been suggested that wage growth has been the missing piece of the puzzle in Britain’s long, slow recovery from the financial crisis.

“It should be the key to unlocking a return to monetary normality.”

Turning to employment figures, there were 32.41 million people in work, which is 350,000 more than the previous year.

But comparing July to September 2018 with the previous three months, the employment rate remained at 75.5%.

There were 1.38 million unemployed people which was 21,000 more than for the previous three months but 43,000 less than for a year earlier. The unemployment rate came in at 4.1%, slightly higher than the previous figures recorded.

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