Is the UK heading into a recession in 2023?
Is the average salary going to increase in line with inflation and rising living costs?
We take a look at the UK labour market and economic conditions, providing the latest overview of 2022 and predictions for 2023.
Labour Market
Employment and unemployment are significant concerns for any full-time or part-time worker entering 2023. Many working professionals will be worried about losing their job, while others will want to prevent any stall in their career and professional development. So, how is the UK labour market standing up?
According to the latest ONS Labour Market Overview, the UK employment rate remained largely unchanged for several months at the end of 2022, at just one percentage point lower than pre-Covid. However, the latest monthly figure shows an increase in the number of pay-rolled employees, by 28,000. The number of vacancies by the end of 2022 stood at 1,161,000, seeing only a slight decrease.
Work From Home
The number of part-time self-employed workers increased, while the number of full-time self-employed workers decreased. For now, conditions appear to be stable and our research indicates that work-from-home is still relevant and a desirable option for employees. With more than one million job vacancies, this is something employers should not ignore when seeking to attract candidates.
Work from home jobs are some of the highest paying jobs in the UK, so there is no need to sacrifice financial freedom if WFH is the best solution for improving your work/life balance.
Check out the highest paying jobs for these groups:
- Highest Paying Jobs In Construction
- Highest Paying Jobs In Accounting
- Highest Paying Jobs In Banking And Insurance
- Highest Paying Jobs In Healthcare
- Highest Paying Jobs In Customer Services
- Highest Paying Jobs In Retail
- Highest Paying Jobs In Transport
- Highest Paying Jobs In Finance
- High Paid Jobs In Human Resources
- High Paid Jobs In Sales
- High Paid Jobs In Marketing
- High Paid Jobs In Information Technology
- High Paid Jobs In London
- High Paid Jobs In Scotland
Salaries and Inflation
The growth in average salaries (excluding bonuses) and average total pay (including bonuses) was at 6.4% at the end of 2022. This is the strongest wage growth rate since pre-Coronavirus times. However, adjusted for annual inflation, average salaries and average total pay fell by 2.6%, one of the largest falls since records began, in 2001.
There is however good news reported in an employee benefits article. According to a poll of large enterprises, more than half (53%) intend to give staff pay rises in 2023, of at least 5%. Furthermore, almost three-quarters (73%) said they expected to offer a more significant pay rise compared to 2022.
The driving factor for these pay decisions is cited as being due to higher inflation (currently 10.5%), labour market conditions, and to improve employee morale and motivation. Much smaller influences on pay decisions were due to the National Living Wage and Real Living Wage. The UK minimum wage is set to rise to £10.42 from April 2023, a rise of 9.7%, following advice from the Low Pay Commission.
Rising Interest Rates
For the tenth time in a row, the Bank of England is expected to raise interest rates. According to a BBC report from Cost of Living Correspondent Kevin Peachey, The Monetary Policy Committee is expected to increase the benchmark rate from 3.5% to 4%. The bank rate is already at its highest level for 14 years.
Any interest rate rise will be felt by borrowers, who will have higher loan, overdraft, credit card, and mortgage costs. However, savers in the UK will receive better returns on their savings.
The Monetary Policy Committee is under pressure to increase rates as it was targeted to keep inflation at 2%, however, prices are currently rising at more than five times that level.
Strikes and Labour Disputes
Last year, there were 467,000 lost working days dues to labour disputes, the highest number in more than a decade. And, strikes over pay not keeping pace with inflation are set to continue in 2023. According to a BBC article by Education Correspondent Hazel Shearing, more than half of schools were affected by teacher strikes on Wednesday. They joined bus drivers, civil servants, train drivers, and university staff on what has been dubbed the biggest strike day in a decade.
According to CNN Business, more than half a million workers joined the strike, which consisted of 300,000 teachers, 70,000 University and College Union members, and 100,000 Public and Commercial Services Union members.
UK Housing Market
Unfortunately, there is little good news to be found in the UK housing market. House prices are expected to fall by 8% in 2023, according to Halifax. This follows the UK housing market flattening in the second half of 2022, as the increases in the cost of living pressured household finances, and interest rates pushed up mortgage costs. If Halifax’s predictions hold, the average UK house price will fall back to its April 2021 valuation.
UK Mobile and Broadband Price Rise
The Guardian reported in January 2023 that UK broadband and mobile users could face a bill rise of 14% from April. Vodafone, EE, TalkTalk, Three, and BT are all contractually permitted to increase their bills in line with last year’s inflation rate, plus 3-3.9% on top.
Mobile phone customers could see their bill rise by more than £100. Broadband customers could pay an additional £50 per year.
UK Recession Prediction
So, is the UK heading into a 2023 recession?
The IMF predicts that the UK economy will retract by 0.6% in 2023, the only economy in Europe predicted to do so. The IMF expects inflation to remain above 8%, compared to 4.6% across advanced economies. The forecasts are based on the United Kingdom experiencing higher energy prices, elevated inflation, and lower productivity.
Next, read our Checkasalary.com report U.S. Job Market and Economic Overview and Predictions - February 2023.
