Stagnant growth in UK take home pay

This is from VocaLink.

Stagnant growth on the VocaLink Public and FTSE 350 Take Home Pay Index

· The VocaLink Public Sector Index is unchanged this month with annual growth of 1.3% for the three months to July

· The VocaLink FTSE 350 Take Home Pay Index falls to 2.9% for the three months to July – down from 3.3% for the three months to June

· The VocaLink Manufacturing Index increases from 2.4% in June to 2.6% in July

· The VocaLink Services Index falls from 3.4% in June to 2.9% in July

London, 4 August 2011: Public sector workers see no change in pay growth this month according to the VocaLinkTake Home Pay Index. At the same time, private sector take home pay growth falls to 2.9% this month, ending a three month growth spell. The VocaLink data suggests that the outlook for both private and public sector pay remains fragile.

Annual growth on the VocaLink Public Sector Take Home Pay Index stands at 1.3% in July – the same rate as June and the slowest of all the pay sectors. Public sector workers faced a steady decline in pay growth since April this year, when pay freezes came into force for many.

Across the private sector, growth on the VocaLink FSTE 350 Take Home Pay Index has fallen by 0.4 percentage points in the three months to July to sit at 2.9%. Despite this fall, annual take home pay growth outstrips the public sector and remains elevated compared with the average growth over the last 12 months of 1.3%. This is largely due to the £1,000 increase in Income Tax free personal allowances at the start of the current tax year.

This month’s VocaLink data shows a continued rise in take home pay growth for the manufacturing sector. Three month annual pay growth climbs from 2.4% in June to 2.6% in July – the fifth consecutive monthly increase.

In contrast, annual growth in the services sub-index has fallen from 3.4% in June to 2.9% in July. The service sector continues to face a challenging trading environment with several retailers closing and job cuts in financial services over the past week. Despite a fall in pay growth the FTSE 350 Index remains notably higher today than in 2010, when growth in take home pay averaged just 1.0%.

Overall, take home pay growth continues to trail behind the rising cost of living, with annual consumer price index (CPI) inflation standing at 4.2% in June. As pay growth fails to live up to inflation, household spending power continues to decrease in real-terms which is a key cause of weak economic growth in the UK at present.

Commenting on July’s statistics, Marion King, Chief Executive Officer at VocaLink, said:

"Pay growth remains weak for both public and private sector sector workers. Across the public sector we are seeing the true bite of pay freezes while the positive impact of Income Tax changes is being partially offset by the weakness of gross earnings growth in the private sector. We have also seen a significant fall in pay growth in the service sector, probably reflecting the difficult trading environment for retailers.  With pay growth failing to keep up with inflation, household spending power continues to fall compared with a year ago – a key contributor to the weak economic growth in the UK at present."

Douglas McWilliams, Chief Executive of economics consultancy Cebr, said:

"Despite the recent fall in the rate of inflation, take home pay growth is still failing to keep pace with the rising cost of living. Moreover, inflation could start rising again later this year as utility companies increase gas and electricity prices; both Scottish Power and British Gas have announced double-digit percentage point increases in prices.”


NEW: visit the new forum: , and have your say on how UK take home pay growth is affecting peoples’ pockets and the impact on the wider economy. Or visit and join the debate.

Notes to editors:

The VocaLink Take Home Pay Index contrasts with the Office for National Statistics (ONS) average weekly earnings estimates which do not take into account the effects of the Income Tax and National Insurance. The VocaLink Take Home Pay Index provide measures of post-tax income rather than gross income and therefore reflect the amount of income workers are actually taking home in their pay packets.

The VocaLink Take Home Pay Index series, three month average annual change

Year 2010 2011
Month Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
% % % % % % % % % % % % %
VocaLink FTSE 350 Take Home Pay Index 0.8 1.3 1.4 1.6 1.7 1.1 0.6 0.5 0.1 1.2 1.8 3.3 2.9
VocaLinkManufacturing Index 2.8 2.3 1.4 1.2 2 0.4 0.4 -0.6 -0.2 0.8 1.1 2.4 2.6
VocaLinkServices Index 0.6 1.2 1.4 1.6 1.7 1.2 0.7 0.6 0.1 1.2 1.9 3.4 2.9
VocaLinkPublic Sector Index 1.2 1.3 1.3 1.3 1.3 1.1 1.3 1.3 1.7 1.6 1.5 1.3 1.3

Source: VocaLink

  1. Dave Holden says

    So talk of attempts to “inflate away debt” don’t count for much on this score.

  2. David Lazarus says

    This also ignores that wages have been stagnant in the UK since 2003. This squeeze on living standards will end badly depending how long it goes on and who it seems to affect. With top earners still seeing increases in earnings it will make for a much more divisive nation in future. In the medium term I do see this meaning another change of government.

    1. Dave Holden says

      I wonder how much clout Danny Alexander has when he says those wanting to cut the 50% rate are “just in cloud cuckoo land”

      Let’s just hope he has more than Vain Vince.

      1. David Lazarus says

        Probably none. Though I doubt that the Conservatives have any idea what to do to get the economy in recover. They have a number of Austrians, in the party who think that they are doing the right thing, and that austerity works. They still believe in trickle down so clearly have learned nothing from the experiences of the US Ireland or Greece. They are still tinkering with supply side solutions and will inevitably drag the economy down while they wait for these to work.

  3. MisterMighty says

    I don’t understand the little chart at the end. If you add up all the numbers, it shows that each industry is increasing wages by a minimum of 15% per year.
    I wish I had a job like that….

Comments are closed.

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