Latest data from the Office for National Statistics shows average wage growth stands at 3.4% but how inflation wipes most of that out
The average worker saw their pay rise by just 0.4% after taking inflation into account in the three months to May, the Office for National Statistics confirmed.
The rise in what is called “real terms” pay compared with 0.3% in the three months to April, and highlights the ongoing financial squeeze for millions of UK households.
The data was published as new PM Andy Burnham prepares to announce measures to help with the cost of living crisis in his first full day in the job.
He kicked things off with the announcement that VAT on electricity bills will be removed in one of his first acts as Prime Minister. The new PM, who promised breathing space on the cost of living in his first speech from Downing Street, said the move is expected to knock £45 off the average bill.
The ONS revealed that regular pay excluding bonuses and before inflation rose 3.4% in the three months to May, having slowed markedly in over the past year. In April 2025, wages were growing an average 5.1%.
However, inflation has also been falling at the same time, helping soften the blow. The consumer price index measure of inflation stood at 2.8% in May, and experts predict it will have dropped to 2.6% when data for June is published by the ONS on Wednesday.
Susannah Streeter, chief investment strategist at Wealth Club investment service, said: “Any relief may prove short-lived given this escalation in the Middle East, which is likely to feed through into fuel, transport and business costs over the coming months.
“With the respite from higher inflation looking increasingly fleeting, interest rate expectations have shifted again, with at least two rate hikes now being priced in by financial markets. This will have yet another effect on affordability and is likely to keep more buyers on the sidelines.”
Mr Burnham’s arrival as PM also comes amid worrying signs about the state of the jobs market. The ONS estimated the UK’s jobless rate stood at 4.9% in May – – the same as April – with 1.76million people out of work – and with experts warning it could rise in the coming months.
The estimated number of vacancies fell 7,000 to 712,000, compared with January to March, though that was higher than the 707,000 in the three months to May, which was the lowest level of since early 2021.
The UK employment rate for people aged 16 to 64 years was estimated at 75.1% in March to May, down 0.1 percentage point on the year but up 0.1 percentage point on the latest quarter.
TUC General Secretary Paul Nowak said: “Today’s figures show Andy Burnham is doing the right thing by pledging action on the cost of living. Working people are up against it with stagnant real pay, over a million people stuck on insecure zero-hour contracts, and a million young people not in employment, education, or training.
“Cutting VAT on energy bills will provide some welcome relief. But with Donald Trump’s illegal war in Iran continuing to drive up bills, the government will need to go further. The new Prime Minister could raise up to £60billion over four years by hiking taxes on banks – and use it to bring down bills further for households across the country.”
