May 2023. The UK economy struggles along, shedding another 0.1% of GDP. The ‘size’ of the economy, measured as GDP, is a fraction (0.7% to be precise) greater than in May 2019, 4 long years ago. It’s still smaller than in the second half of 2019. Even worse, average real pay (i.e. after allowing for CPI inflation) is a fraction lower than it was in 2019 – in May 209, £499, in May 2023, £497. But that average masks a great deal of variety, between those whose pay has kept up with inflation (and in some cases moved ahead of it), and those whose real pay has fallen sharply and dangerously. To be precise, it is those working in manufacturing and in the public sector whose average real pay has drastically fallen.
In a couple of tables and charts, you can get a clear picture in the changes in the pay relativities between key sectors of the UK economy.
We have done two timeline comparisons:
(i) comparing May 2019 with May 2023, when the economy (measured in GDP) was just 0.7% smaller than now, and
(ii) comparing May 2010 with May 2023, giving a snapshot of the change since the Conservatives took office 13 years ago.
Here are the tables – first up, that covering the last 4 years
Coincidentally – or not – the recommended pay rise from the public sector pay review bodies, accepted today by the government, is around 6.5%, or close to the 4 year decline of 6.2%, so this (if implemented) should stop the negative pay gap from rising still further – but is unlikely to redress it.
And second, a table showing the last 13 years, the whole Conservative government era:
We can summarise the results for the last 4 years in three sentences. Overall, average pay in the ‘whole economy’ has almost (but not quite) kept up with inflation, but this masks very sharp divisions. Those in finance and business services have done rather well overall in total pay, with average earnings in the sector keeping well ahead of inflation. For those in other sectors of the economy, your average pay has generally fallen well below inflation – so your real pay has, on average, plummeted.
For the longer 13 year period since 2010, pay in the ‘whole economy’ has very nearly kept up with inflation, and the biggest ‘winners’ by far (on average) are those employed in financial and business services, where average total pay has risen by a big 8.7% above CPI inflation.
The longer-term major ‘losers’ on pay are those employed in manufacturing, and in the public sector. A lesser hit has also been taken by those in construction, and in retail and hospitality etc.
The definition of “finance and business services” is given by ONS as categories K to N of its “industry sections”, and these comprise almost exactly one third of the measured economy. The categories are:
- Financial & insurance services (8%)
- Real estate activities (13%)
- Professional, scientific & technical activities (7%)
- Administrative & support service activities (5%)
For comparison, Manufacturing comprises nearly 10%, and Construction just over 6%, with Retail, hospitality etc. (section G and I) around 13%.
I’ve turned the data in the above tables into charts, for those who prefer to visualize the disparities more clearly:
And finally, the chart for the last 13 years: