Wages plummet as cost of living crisis batters housesold budgets

“Pay rises, excluding bonuses, still trail inflation by a large margin and the risk is that income will become even more detached from the reality on the high street over the coming months. It’s especially painful for public sector workers - with rises of just 1.5% at a time inflation is soaring.

“But while the nation’s nurses, teachers and armed forces see pay fall far behind price rises, bankers’ bumper bonuses have seen earnings in the finance and business services sector soar 10.6%.

“All this in the face of a potential rate rise by the Bank of England this week, which is the larger of the two evils threatening the pounds in people's pockets right now. 

“While the Bank of England is damned if it raises rates on Thursday and damned if it doesn’t, the biggest threat to households is a significant rise in the cost of borrowing for home buyers and those remortgaging. A meaningful rate rise would have a huge impact on consumer confidence, threaten to derail the economy, tip it into recession and, if that wasn’t enough, weaken the labour market to the point wage growth is stamped out. 

“There has been speculation that worse than expected GDP data this week will sway the Bank against a significant increase but its hands are likely tied by now. With one eye on what the Federal Reserve is doing in the US on the eve of the decision, the Monetary Policy Committee has hours to decide between its rock and a hard place.”

If you'd like to read more on this topic, we've collated the latest UK cost of living statistics and trends, covering inflation rates, average UK living costs, income, house prices, and more.

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