Public sector strikes and wage inflation: Are they keeping UK inflation higher than expected?

Inflation in the UK has been rising sharply in recent months, reaching a 40-year high during 2022 and 2023. There are several factors that have contributed to this, including the war in Ukraine, rising energy prices, and supply chain disruptions. However, two factors that have received less attention are the public sector strikes and wage inflation.

The public sector strikes, which have been taking place since December 2022, have been driven by demands for higher wages. Workers in the public sector are facing rising living costs, and they are calling for their wages to keep pace. The strikes have disrupted public services, and they have also had a knock-on effect on inflation.

General wage inflation is another factor that is keeping UK inflation higher than expected. Wages in the UK are rising at their fastest pace in decades, and this is putting upward pressure on prices.

How do strikes and wage inflation increase living costs?

The public sector strikes are disrupting public services, which can lead to higher costs for businesses and consumers. For example, the strikes have led to delays at airports and railway stations, which is increasing the cost of travel. The strikes are also disrupting the delivery of healthcare and education, which is increasing the cost of these services.

When wages rise, businesses may raise prices in order to cover their increased costs. If a supermarket needs to pay a higher wage to attract new staff or retain existing staff, they are likely to charge more for the items they sell in the store. This can lead to a spiral of rising prices and wages, which can be difficult to control.

What can be done?

The Bank of England is raising interest rates in an attempt to bring inflation under control. They have just increased the rate to 5% on the 22nd June 2023.

Raising interest rates is the best way the Bank of England has to tackle inflation. The problem is it can take time to work, usually, up to two years.

The theory being higher interest rates will mean people have less money to spend each month, compared to when interest rates are low. When overall spending falls, price rises slow down, this subsequently brings down the inflation rate.

However, it is unclear whether this will be enough to do the job because wage inflation and possibly public sector strikes, are two factors that are likely to continue to put upward pressure on prices and we are yet to see if rate rises are stopping this trend.

What this means for you

Given the current environment it’s important that all your capital is working as hard as possible. This includes cash in the bank, investments, and pensions.

If you have not already done so, you need to investigate what rate of interest your cash savings accounts are earning. You could/should be earning over 4% in cash-based accounts at present, depending on the level of access you need.

The same is true of your investments and pensions. How many “old pensions” do you have dotted around from previous employers that need reviewing and investigating? These accounts can sometimes add up to thousands of pounds that are simply sitting dormant with no relevant supervision to suit your needs.

At Wingate we use a staged process that allows us to explore each area of your finances to ensure you are maximising the opportunities in front of you. We then ensure you build a strategy that means you are more likely to meet your long term objectives.

If this sounds of interest to you, please do not hesitate to contact me.

Other Articles

26 Apr 2024

Share This Article


Are you ready to make informed decisions about your money?