Pay for financial services workers in the UK has surged at double the pace for the rest of the economy since the COVID-19 pandemic began, widening inequality at a time when consumer spending power is being squeezed.
The Institute for Fiscal Studies (IFS) calculated that average monthly pay in finance was 31 percent higher in February than at the end of 2019, above the 14 percent rate prevailing across all sectors. The median increase was lower still, implying that growth was concentrated among the highest earners in banking and insurance.
The findings add to growing alarm over inflation, which is running at three times the pace that the Bank of England targets, and fuel concerns about the poorest segments of society being left behind in a wage boom enjoyed by the some of the richest.
Photo: Andy Rain, EPA-EFE
“This appears to be the first time since the 2008-2009 financial crisis that financial sector pay has taken off like this, and it remains to be seen whether this is a one-off spike or a new trend,” IFS senior researcher Xiaowei Xu said in a statement yesterday.
Pay in finance has “dramatically pulled ahead” of the rest of the economy since October last year, the IFS said.
It studied payroll data from Britain’s Her Majesty’s Revenue and Customs and the Monthly Wage & Salaries survey.
The IFS said that finance accounts for 29 percent of the top 1 percent of earnings and 44 percent of those rank in the top 0.1 percent.
The institute found few reasons that pay in the sector has broken away so quickly, saying that finance is no more reliant on immigrants from the EU than the rest of the economy and does not have higher rates of people over the age of 50 leaving the workforce.
“Earnings inequality has been falling for some years before the pandemic hit, with low-paid workers seeing the strongest pay growth,” it said. “The recent surge in pay among financial sector employees, particularly the top earners, has led to a reversal of this trend.”
Separately, UK retailers said that a surge in food prices would keep inflation rising, as the world adapts to supply-chain bottlenecks holding up the flow of goods across borders.
The British Retail Consortium (BRC) said that shop price inflation last month accelerated to 2.7 percent from a year earlier, the most since 2011 and up from 2.1 percent in March.
The cost of food rose 3.5 percent, and there was a broad increase in the price of other goods, ranging from furniture to electrical products and books, the BRC said.
A separate survey of manufacturers, carried out by the Confederation of British Industry, showed the sharpest drop in optimism in the three months to last month since the onset of the pandemic, as costs and prices saw the biggest jump since the survey began in 1988.
“Customers should brace themselves for further price rises,” BRC chief executive officer Helen Dickinson said in a statement. “Global food prices have reached record highs. They will place further upward pressure on UK food prices in coming months.”
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