Pay has shrunk by 10% in parts of UK, TUC study finds

The TUC analysed figures from the Office for National Statistics

Total pay in some parts of the UK has shrunk by more than 10% since the start of the downturn in 2007, analysis by a union organisation suggests.

The TUC said north-west and south-west England had seen the sharpest cuts - 10.6% and 10.1% respectively.

It blamed wages not keeping pace with inflation and changes in employment, such as more part-time working.

Business leaders said pay restraint had been crucial in protecting jobs during tough economic times.

After adjusting for inflation, the TUC's analysis of official figures suggested that on the eve of the recession, workers across the UK were earning a total of £690bn.

Last year the overall pay packet was £638bn - £52bn (7.5%) lower.

The North West saw the sharpest cut in its overall pay packet between 2007 and 2012 - a fall of 10.6% or £7bn last year. The West Midlands and Scotland saw cuts of 9.7%, it said.

Wales saw a reduction of 8.1%, Northern Ireland 4.8% and London 3.9%, the smallest cut.

The TUC analysed figures from the Office for National Statistics' annual survey of hours and earnings and its labour force survey.

'Massive hit'

A modest increase in employment had failed to offset a "sharp" cut in wages in recent years, said the TUC.

General secretary Frances O'Grady said: "Over the last five years, people have taken a massive hit in their pay packets, while millions more have had to reduce their hours or take lower paid work. Many people have lost their jobs altogether."

She said that shrinking wages were hitting living standards, holding back businesses and damaging growth prospects.

"While economic growth is the key challenge facing the UK today, the years running up to the crash taught us that growth without wage gains just creates more unsustainable debt," she said.

"Employers and both local and central governments need to recognise the importance of decent wages in delivering sustainable economic growth. They can start by becoming living wage employers and being more transparent about their pay systems."

'Tough climate'

But Neil Carberry, director for employment and skills at the Confederation of British Industry, said: "Pay restraint, though tough for many, has been crucial in protecting jobs and keeping people in work in the toughest economic climate for decades.

"The alternative for many businesses would have been to make staff redundant, but instead we've seen around a million new private sector jobs created in the last three years.

"The national minimum wage is already set at the right level, with tens of thousands of firms paying more if they can afford to do so."

Mike Cherry, national policy chairman at the Federation of Small Businesses, said: "At a time when economic growth is elusive and business confidence still fragile, it is understandable that many companies have been putting the annual pay rise on hold. In many low-skilled sectors, businesses already run on very thin margins, which means there is limited scope to increase wages even at the best of times, when the economy is performing strongly.

"Small employers will pay their employees more if they can afford it."

He said the government had an important role to play through greater action to reduce company overheads, such as business rates and fuel costs, and freeing up cash-flow by ending late payment practices by big companies to their suppliers.

"This will make small companies more profitable and enable them to pay their staff more," he said.

The TUC study coincides with its new pay campaign, Britain Needs A Pay Rise.