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Pay downturn to end in Scotland in two years but Londoners may have to wait until 2030

Paloma Kubiak
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Paloma Kubiak

Wages in the UK are set to return to pre-crisis levels by 2024 – but it could take longer depending on where in the country you work, a leading think tank has warned.

Despite positive data out this morning showing wage growth hit a 10-year high in the three months to September, Britain’s “unprecedented pay downturn” is set to continue for another decade in some parts of the country.

The Resolution Foundation said pay will reach pre-crisis levels in Scotland first in 2020. But Londoners will have to wait a further 10 years before wages return to their 2008 peak.

Analysis by the think tank shows real hourly pay is currently £12.50, around 3.5% below the highs of a decade ago when it stood at £13.34.

If the latest wage growth projections are correct, it will take until the end of 2024 for average earnings to return to their peak.

But wages in many parts of the country are even further below peak, with the gap biggest in London (-6.8%), the East Midlands (-5.6%) and Northern Ireland (-4.7%).

Scotland, where pay is just 1% below its previous peak, is closest to returning to pre-crisis pay levels. However, sluggish growth in recent years means pay isn’t expected to recover until 2020.

The Foundation also said pay prospects depend on what industry people work in.

Pressure to raise pay to fill vacancies could be particularly strong in the Information, Communications, and Finance sectors, where the ratio of unemployed people who previously worked in those sectors to vacancies is relatively low, it said.

Stephen Clarke, senior economic analyst at the Resolution Foundation, said: “Britain is just two-thirds of the way through an unprecedented pay downturn. The level of pay workers enjoyed before the crisis is not expected to return until the middle of the next decade. For Londoners the end could still be over a decade away. Scotland in contrast looks likely to return to peak pay first.

“But while the long-run picture on pay is pretty gloomy, there are now signs that Britain’s long overdue pay recovery is finally gaining momentum. Nominal pay growth has hit 3% for the first time since the crisis, and could strengthen further in the coming months. Sectors like hospitality, finance, and real estate are already experiencing pay rises well above 4% as the pool of available labour to draw upon continues to shrink.

“Ultimately though, our long-term pay prospects depend on higher productivity growth. Until that happens, we’re unlikely to see a strong and sustained wage recovery.”