But the increase is still falling short of inflation levels, which are currently at 10.5%, and in real terms pay fell by 2.5%.

Pay, including bonuses, rose 5.9% but when accounting for inflation, wages actually fell by 3.1%.

The growth to pay is the strongest ever seen outside of the Covid pandemic, according to the data from the Office for National Statistics (ONS).

Average pay for private sector workers rose 7.3% over the quarter while public sector pay rose 4.2%.

There has been a wave of strikes across the public sector in the last few months with ambulance staff, nurses, and teachers among those walking out over pay disputes and working conditions.

Strikes and walkouts caused 843,000 working days to be lost in December 2022, which is the highest since November 2011.

Unemployment levels remain the same

The UK unemployment rate rose by 0.1% over the quarter to 3.7%. The number of people out of work for up to six months also rose, especially for those aged 16 to 24.

The Chancellor, Jeremy Hunt, said: “In tough times, unemployment remaining close to record lows is an encouraging sign of resilience in our labour market.

“The best thing we can do to make people’s wages go further is stick to our plan to halve inflation this year.”

‘Disposable incomes hammered by higher prices’

Alice Haine, personal finance analyst at Bestinvest, said: “Britain’s workers are seeing their disposable incomes hammered by higher prices – with the jump in wages unlikely to ease in the short term as those feeling the pinch ask for pay increases to give their purchasing power a fighting chance against inflation.

“As pay packets fail to keep pace with rising living costs and the gap between public and private employers’ wage expectations widens, thousands of public sector workers have resorted to industrial action in recent months – something that has a detrimental effect on productivity with 843,000 working days lost to strikes in December – the highest level since the aftermath of the financial crisis.

“It’s not just falling real wages causing worker discontent; underpinning it all is a chronic shortage of workers with the UK’s economic inactivity rate still well above pre-pandemic rates at 21.4% in the three months to December – as early retirement, high long-term sickness rates, lengthy NHS waiting lists and the high cost of childcare all take their toll.”