Retail wages hit record levels in second quarter

Average weekly earnings in the retail sector rose 6 per cent to £689.57 in Q2 2024, from £649.61 in Q1 2024, the highest quarter on record, official data showed showed on Tuesday (13). 

Vacancies in the sector continued the downward trend from 65,000 to 61,000 in the three months to July 2024, ONS labour market statistics have shown. 

“Increased competition to attract and retain staff and the uplift in the national minimum wage have pushed up wages to record levels,” Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, commented.

“This squeeze on the bottom line, at a time when retail sales are turbulent, will put significant pressure on margins.”

Baker, however, noted that the pressure on wages should start to ease as the labour market is cooling and rationalisation across the industry has allowed retailers to adapt.   

“In addition, when you combine increase consumer confidence with real wages growth of 2.4 per cent, we should start to see a boost in consumer spending in the second half of the year, which would help to ease the acute financial pressure for retailers,” Baker added.

Overall, wage growth has slowed to the lowest level in nearly two years and unemployment rate has unexpectedly dropped to 4.2 per cent, according to the Office for National Statistics (ONS) data.

The unemployment rate for the second quarter compared with 4.4 per cent in the three months to the end of May, the ONS said in a statement.

Analyst consensus had been for a small rise in the rate.

The ONS added that wages growth, excluding bonuses, slowed to 5.4 per cent from 5.8 per cent over the same reporting period. That was the lowest level since August 2022.

“The number of job vacancies continues to decline, although the total number remains above pre-pandemic levels,” added ONS director of economic statistics Liz McKeown.

A busy week for British economic data sees the release Wednesday of inflation numbers, ahead of second-quarter growth figures Thursday.

Together, the data could provide clues regarding the pace of future interest-rate cuts from the Bank of England.

“The further easing in wage growth will be welcomed by the Bank of England as a sign that labour market conditions are continuing to cool,” noted Ruth Gregory, deputy chief UK economist at research group Capital Economics.

“This lends some support to our forecast that the Bank of England will press ahead with two more 25 basis-point interest rate cuts later this year.”

The BoE earlier this month cut borrowing costs for the first time since the onset of the Covid pandemic in early 2020.

This after UK inflation has fallen sharply from four-decade highs.