Austerity and the cost of living crisis means workers have seen no real increase in their wages since 2008, while many are actually worse off.
A report by the Centre for Cities think tank warns that workers in most parts of the country are no better off than they were 16 years ago after taking inflation into account.
Andrew Carter, the chief executive of the Centre for Cities, said that raising economic growth is “the only sustainable route to higher wages”.
And he warned Labour chancellor Rachel Reeves that only radical action to improve the lives of ordinary Britons will boost their confidence and ability to see a positive future.
“The stark nature of (the) findings shows an incremental approach is not going to be enough. Boldness, urgency and scale are crucial,” he said.
The report found that wages have stagnated in both the North and South, while people in some places are paid far less in real terms than they once were.
Workers in Mansfield, Nottinghamshire, have suffered the steepest drop in real wages, meaning they today earn nearly a fifth less than in 2008.
Even where wages have risen after accounting for inflation, the growth has been underwhelming compared with previous decades.
While workers in Cambridge made 14 percent more in 2023 than in 2008, this is positively anaemic when compared to the 40 percent rise in wages in the previous 11 years.
The research also highlighted the chasm in earnings across the country, with eight in 10 cities with the highest wages in the South East.
Londoners make 24 percent more than the average, and 68 percent more than workers in Britain’s worst-paid place, Burnley.
This means that by August, an average worker in London has made what someone in Burnley earns in a whole year.
The report also warned that many cities across the UK are too dependent on one sector, making them vulnerable to industrial failure.
Aberdeen is the most prominent example, with almost half of the output from its export base coming directly from oil and gas exploration – an industry that is under threat from the shift to net zero. Others include cars for Sunderland and IT for Reading.
UK economic growth has tailed off since Labour came to power. And surveys out today point to a continued loss of momentum, with one study by Lloyds finding that 11 of 14 sectors across the economy reported output shrinking in December.
Consumers are also increasingly concerned, with separate research by Deloitte finding that confidence in the state of the economy had plunged by 14 percentage points in the final quarter of the year.
The accountant put this steep fall down to worries about the impact of the chancellor’s £26bn National Insurance tax raid on employers, as well as higher living costs.
However, the Deloitte, the Office for Budget Responsibility and the IMF argue that growth is expected to pick up through this year. And the Bank of England is under pressure to go further and faster on interest rate cuts, which would help home buyers and businesses.
Lloyds found that only three sectors reported any growth at the end of 2024. They included software services, real estate and financial services – all sectors concentrated in the South East.
The number of businesses saying high inflation was making them concerned that activity would be lower in 2025 also rose to its highest level in more than two years.
Nikesh Sawjani, an economist at Lloyds, said: “Faced with continued cost pressures, our data suggests that firms are taking decisions to reduce operating expenses to protect their margins.”
