Wages in the United Kingdom grew by approximately 5.9 percent in January 2025, although when adjusted for inflation, wages only grew in real terms by 2.1 percent. When bonus pay is included in wage growth calculations, wages grew by 5.8 percent in nominal terms, and by 2.2 percent in real terms. Twenty months of inflation outpacing wages Between November 2021 and June 2023 inflation was higher than wage growth in the UK, resulting in falling real terms earnings throughout this 20-month period. While UK inflation peaked at 11.1 percent in October 2022, it was not until April 2023 that it fell below double figures, and not until May 2024 that it reached the Bank of England's target of two percent. Forecasts from the Autumn 2024 budget predict that the annual UK inflation will for 2024 will be 2.5 percent, down from 7.3 percent in 2023 and 9.1 percent in 2022. Due to high inflation, the UK's minimum wage also rose quite significantly during this period, with the "main" rate increasing from 8.91 pounds per hour in 2021 to 12.21 pounds per hour for 2025. Average earnings and gender pay gap For full-time workers in the United Kingdom, the median average annual earnings was 37,430 British pounds in 2024, compared with 34,663 pounds in 2023. In London, average earnings were significantly higher than the rest of the country, at 47,455 pounds. Just two other areas of the United Kingdom, the South East and Scotland, had annual salaries above the UK average. North East England had the lowest average salary, at 32,960 pounds. As of 2024, the gender pay gap for median gross hourly earnings in the UK was 13.1 percent for all workers, falling to seven percent for full-time workers and -3 percent for part-time workers. Compared with 1997, when the gender pay gap was 27.5 percent for all workers, there has been a degree of progress, although, at current trends, it will be some time before the gap is closed entirely.

In the three months to December 2024, average weekly earnings in the United Kingdom grew by 5.9 percent, while pay including bonuses also grew by six percent, when compared with the same period in 2023. In the same month, the inflation rate for the Consumer Price Index was 2.5 percent, indicating that wages were rising faster than prices that month. Average salaries in the UK In 2024, the average salary for full-time workers in the UK was 37,430 British pounds a year, up from 34,963 in the previous year. In London, the average annual salary was far higher than the rest of the country, at 47,455 pounds per year, compared with just 32,960 in North East England. There also still exists a noticeable gender pay gap in the UK, which was seven percent for full-time workers in 2024, down from 7.5 percent in 2023. Lastly, the monthly earnings of the top one percent in the UK was 15,887 pounds as of November 2024, far higher than even that of the average for the top five percent, who earned 7,641 pounds per month, while pay for the lowest 10 percent of earners was just 805 pounds per month. Waves of industrial action in the UK One of the main consequences of high inflation and low wage growth throughout 2022 and 2023 was an increase in industrial action in the UK. In December 2022, for example, there were approximately 830,000 working days lost due to labor disputes. Throughout this month, workers across various industry sectors were involved in industrial disputes, such as nurses, train drivers, and driving instructors. Many of the workers who took part in strikes were part of the UK's public sector, which saw far weaker wage growth than that of the private sector throughout 2022. Widespread industrial action continued into 2023, with approximately 303,000 workers involved in industrial disputes in March 2023. There was far less industrial action by 2024, however, due to settlements in many of the disputes, although some are ongoing as of 2025.

Germany had an average salary of 65.7 thousand U.S dollars per year in 2023, the highest among the five largest European economies. Germany has consistently had the highest wages in Europe over the last thirty years. Many countries in Europe experienced a significant decrease in their average wage level following the global financial crisis of 2008, with France and Germany bucking this trend by retaining robust wage growth. While British wages have stagnated since the crash, only surpassing their 2007 level in 2019, Italian and Spanish wages have in fact fallen, driven by the macroeconomic troubles of these countries since the Eurozone crisis.

This survey intends to fill a gap by carefully documenting the characteristics of the workers engaged in alternative work arrangements and the gig economy in the United Kingdom. We collected the data via an online survey of 20,000 respondents representative of the UK working-age population (18-65 years old). Alternative work arrangements, such as independent contractors, zero hours contract workers, temporary help agency workers and contract company workers, are a growing and increasingly important feature of the labour markets of many developed economies. However, little is known about the nature and variety of these new types of jobs in terms of employment conditions (e.g. pay, hours worked, patterns of work), workers’ characteristics including workers’ preferences for different working arrangements, and employment rights.

1) Developing Skills: Strengths and Weaknesses in the System, and What can be Done. The new Industrial Strategy must consider how the education system can create the general and specific skills needed by businesses today and in the future. CEP will synthesise evidence on strengths and weaknesses in the current education system at all levels (schools, colleges and universities), and highlight where improvements can be made. This might be within the current system, or through the design of new mechanisms to incentivise individuals and firms to invest in training. In conjunction with researchers from the Centre for Vocational Education Research (CVER), we can produce a synthesis of findings on technical and vocational education. We will also be able to study in more depth firm-level relationships with higher education institutions, with the aim of better understanding how they impact on local economies. 2) Driving Growth across the Country: Mapping the Data on Firms and Labour Markets. The starting point for developing appropriate regionally focused growth policies is to understand the status quo, to carefully document how this has changed over time, and to better understand the factors underlying and driving geographic differences. The CEP is developing better data to describe the geographic spread of industry, and associated variation in labour market patterns like problems of real wage stagnation and the rise of new types of work arrangements, including the gig economy. As well as analysis of the digital economy, and the opportunities and threats it poses for the labour market and implications for the future. We will seek to release reports describing the data, map the relevant metrics (including productivity, investment, employment and pay) so that policymakers and stakeholders could benchmark their own regions/sectors. 3) Supporting Businesses to Start and Grow: Drivers of Innovation and Diffusion. The Industrial Strategy should be focused on addressing market failures which cause barriers to investment in innovation, technologies or organisational practices that drive productivity growth. One strand of work using patents will analyse the innovation spill overs between technologies and places, and the types of policy that stimulate business RD and innovation. The spill over analysis would also be linked with new measures of regional Total Factor Productivity (TFP) to understand the local economic impact of innovation. This work will help guide policymakers to where the payoffs of RD investment might be greatest for the UK. In this context, we would consider payoffs both in terms of economic growth but also in terms of achieving non-economic objectives such as lower greenhouse gas emissions and more secure energy supply. We also plan to produce a report together with the LSE's Grantham Institute on clean growth. Another strand of work will consider the role of financial constraints on firm growth, and the extent to which these have contributed to recent poor productivity performance in the UK. And finally, we will explore the relationships between management practices and investment efficiency. 4) Encouraging Trade and Inward Investment: Brexit and Industrial Strategy. Many UK firms (particularly SMEs) face longstanding barriers to exporting, and Brexit will create new challenges in this area. At the same time, while UK Foreign Direct Investment (FDI) performance has been stronger to date, there are concerns that Brexit will induce multinationals to relocate in order to maintain access to the single market. CEP will seek to understand the likely trade and FDI impacts of Brexit, and the implications for labour markets and consumers. This will include a deeper analysis of the sectoral and regional dimensions, and should be useful to inform the scope and form of industrial policy response.

In 2024, the gross domestic product (GDP) of the United Kingdom grew by 0.9 percent and is expected to grow by just one percent in 2025 and by 1.9 percent in 2026. Growth is expected to slow down to 1.8 percent in 2027, and then grow by 1.7, and 1.8 percent in 2027 and 2028 respectively. The sudden emergence of COVID-19 in 2020 and subsequent closure of large parts of the economy were the cause of the huge 9.4 percent contraction in 2020, with the economy recovering somewhat in 2021, when the economy grew by 7.6 percent. UK slips into recession in late 2023 In the last two quarters of 2023, the UK economy shrank by 0.1 percent in Q3 and by 0.3 percent in Q4, plunging the UK into recession for the first time since the COVID-19 pandemic. Even before this latest recession, however, the UK economy has been struggling with weak growth. In the eight quarters between 2022 and 2023, the economy grew in just half of them, falling in three, and stagnating in one. As the UK gears up for a likely general election in 2024, the economy has consistently been seen as one of the most important issues to people in Britain, ahead of health, immigration and the environment. As for which political party would handle the economy better, the ruling-Conservative party have trailed the Labour Party on this issue in polls since October 2022. High inflation persisting longer than expected One of the main factors that explains the UK's economic woes recently is rising prices. UK inflation accelerated sharply from late 2021 onwards, and reached a peak of 11.1 percent in October 2022. Unfortunately for UK residents, wage growth has only recently caught up with inflation, with wages in real terms falling throughout for twenty months between November 2021 and June 2023. By January 2024, inflation had fallen to the more modest rate of four percent, but getting inflation down to such levels came at a price. The Bank of England raised interest rates throughout 2022 and 2023, which certainly played a part in the UK's weak economic performance during that time.

The United Kingdom's economy grew by 0.9 percent in 2024, after a growth rate of 0.4 percent in 2023, 4.8 percent in 2022, 8.6 percent in 2021, and a record 10.3 percent fall in 2020. During the provided time period, the biggest annual fall in gross domestic product before 2020 occurred in 2009, when the UK economy contracted by 4.6 percent at the height of the global financial crisis of the late 2000s. Before 2021, the year with the highest annual GDP growth rate was 1973, when the UK economy grew by 6.5 percent. UK economy growing but GDP per capita falling In 2022, the UK's GDP per capita amounted to approximately 37,371 pounds, with this falling to 37,028 pounds in 2023, and 36,977 pounds in 2024. While the UK economy as a whole grew during this time, the UK's population grew at a faster rate, resulting in the negative growth in GDP per capita. This suggests the UK economy's struggles with productivity are not only stagnating, but getting worse. The relatively poor economic performance of the UK in recent years has not gone unnoticed by the electorate, with the economy consistently seen as the most important issue for voters since 2022. Recent shocks to UK economy In the second quarter of 2020, the UK economy shrank by a record 20.3 percent at the height of the COVID-19 pandemic. Although there was a relatively swift economic recovery initially, the economy has struggled to grow much beyond its pre-pandemic size, and was only around 3.1 percent larger in December 2024, when compared with December 2019. Although the labor market has generally been quite resilient during this time, a long twenty-month period between 2021 and 2023 saw prices rise faster than wages, and inflation surge to a high of 11.1 percent in October 2022.