The average annual UK salary would need to increase by £3,000 in order to keep pace with inflation in 2023, according to a new study.
Research by peer-to-peer real estate investment platform, easyMoney, has analysed historic annual changes in the average rate of inflation and the average salary in the UK, to see how the size of today’s gap between costs and earnings compares to previous years.
The data showed that in 2021, the average annual salary fell -0.7% to £31,437. At the same time, inflation increased by 2.6%.
In 2022 by comparison, earnings saw an uptick of 6.3% to reach an average of £33,402 per year, although last year saw a significant inflation rise of 9.1%
Based on the average rate of inflation for 2023 so far, easyMoney’s analysis has forecast that by the end of the year, the year-on-year increase will be a further 9%. To match this increase with a complimentary 9% rise in earnings, the average salary would need to increase by £2,992 to reach £36,394 by the end of the year.
Even if the salary increase was based on the most recent monthly inflation rate – which according to the Office for National Statistics (ONS) was 6.8% in the year to July – earnings would need to increase by £2,271 per year to keep pace.
“Rising inflation is reducing the spending power of the pound and making everyone in the UK worse-off,” said easyMoney CEO, Jason Ferrando. “On top of that, wage growth simply isn’t keeping pace, making the situation even worse.
“With the economy as it is, many businesses and employers are reluctant to give sufficient pay rises because they’re already concerned about surviving this period of financial stress. As such, those who are lucky or savvy enough to have some savings squirrelled away might want to look at using it to invest.
“Interest rates are climbing and while not every financial institution is passing this benefit onto savers, there are many avenues that are providing strong returns that could go some way towards easing the pressures of low pay and high inflation.”
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