The UK’s Real Wage Reality

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Capital on Tap UK 13 November 2025 minute read

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Rising inflation has rippled through every corner of the economy, tightening budgets and reshaping the way people live and work. Households are finding it harder to keep pace with everyday costs, from rising food prices to soaring energy bills, while small businesses are fighting to stay afloat in an increasingly unforgiving climate. As living expenses climb, employees are feeling mounting financial pressure, prompting many larger companies to boost wages in a bid to support their staff and ease the burden.

But for small and medium-sized enterprises, that solution isn’t always within reach. Higher overheads, statutory wage increases, and growing National Insurance contributions have already stretched their resources thin. Many are caught in an endless cycle: as pay stagnates in certain sectors, consumer spending power weakens, reducing the very demand that businesses rely on. The result is a tightening squeeze from both sides, businesses battling to retain staff while workers struggle to make ends meet.

To uncover where this pressure is being felt most, the team at Capital on Tap has compared the average wage across UK cities and sectors against the country’s Consumer Price Index (CPI) inflation rate, the key measure that tracks how the cost of everyday goods and services changes over time. The analysis highlights where real earnings are falling furthest behind and which regions are facing the greatest financial strain, before widening the lens globally with OECD data to reveal how the UK compares to other nations in the race to keep pace with rising costs.

Expert commentary from Rebecca Alford, Chief Financial Officer at Capital on Tap, rounds off the research, offering practical guidance for SME owners on how to navigate the financial strain, from protecting profit margins and retaining valued staff to planning ahead in an increasingly competitive labour market.

The UK cities struggling to keep wages up with inflation

To uncover which UK cities are struggling most to keep pace with inflation, we compared average wage growth across major cities from 2014 to 2024 against the UK’s CPI inflation rate. Each city was then given a real (inflation-adjusted) wage growth score and ranked to reveal where earnings have fallen furthest behind rising costs.

Rank	City	Total % wage growth from 2014 to 2024	UK CPI Rate from 2014 to 2024	Real (inflation-adjusted) wage growth
1	Reading	18.21%	36.90%	-13.63%
2	Southend-on-Sea	20.30%	36.90%	-12.10%
3	London	24.54%	36.90%	-9.00%
4	Leeds	29.33%	36.90%	-5.50%
5	Bristol	30.63%	36.90%	-4.55%
6	Birkenhead	30.99%	36.90%	-4.29%
7	Manchester	34.31%	36.90%	-1.86%
8	Derby	38.19%	36.90%	0.97%
9	Cardiff	40.40%	36.90%	2.58%
10	Sunderland	40.89%	36.90%	2.95%

1. Reading

Reading tops the list of where wages have fallen the furthest behind inflation over the past decade, signalling just how deeply the cost-of-living crisis has taken root beyond London. Average pay rose by 18.21% between 2014 and 2024, but with CPI inflation soaring 36.9%, workers have effectively seen a 13.63% loss in real earnings.

2. Southend-on-Sea

Southend-on-Sea comes in second, where wages have struggled to keep up with rising prices, climbing 20.3% over the past decade against inflation’s surge. This widening gap highlights the mounting financial strain on coastal towns, where many industries rely on tourism and service jobs with limited scope for wage rises.

3. London

England’s capital, London, rounds out the top three. Despite typically higher salaries, pay in the city has struggled to match the soaring cost of living. Wages rose by 24.54%, yet once inflation is factored in, Londoners are still 9% worse off in real terms, a notable setback given the capital’s already high housing, childcare, and transport costs.

Rebecca, Chief Financial Officer at Capital on Tap, says: “Across the UK, the data paints a worrying picture of pay failing to keep pace with rising prices. Real wages have eroded even in cities with stronger economies, leaving employees with less spending power and small businesses facing reduced consumer demand. The squeeze on disposable income doesn’t just affect individuals; it limits local economic growth, challenges recruitment, and puts additional pressure on employers to find new ways to retain staff in an increasingly competitive labour market.”

The UK cities where wage growth is outpacing inflation

While many areas across the UK have seen wages struggle to keep up with inflation, some cities have experienced stronger pay growth over the past decade. By comparing average wage increases from 2014 to 2024 with the UK’s CPI inflation rate, we identified the cities where real (inflation-adjusted) earnings have managed to stay ahead.

Rank	City	Total % wage growth from 2014 to 2024	UK CPI Rate from 2014 to 2024	Real (inflation-adjusted) wage growth
1	Sheffield	97.67%	36.90%	44.44%
2	Southampton	72.70%	36.90%	26.19%
3	Kingston upon Hull	72.19%	36.90%	25.81%
4	Nottingham	71.84%	36.90%	25.56%
5	Coventry	70.48%	36.90%	24.57%
6	Leicester	68.97%	36.90%	23.47%
7	Luton	65.31%	36.90%	20.79%
8	Swansea	58.56%	36.90%	15.85%
9	Preston	58.55%	36.90%	15.85%
10	Stoke-on-Trent	51.79%	36.90%	10.91%

1. Sheffield

Sheffield tops the list as the UK city where wage growth has most strongly outpaced inflation. Average pay has increased by 97.67% since 2014, more than double the rise in CPI inflation, resulting in a real wage growth of 44.44%. While this suggests strong local wage performance, the figure may also reflect economic regeneration and shifts in higher-paying sectors, such as manufacturing innovation and digital industries that have taken root in the region.

2. Southampton

In Southampton, wages have risen by 72.7% over the past decade, around 26% higher than inflation, giving workers a real wage growth of 26.19%. This suggests that pay in the city has grown faster than prices, likely supported by its busy port, strong logistics sector, and growing professional services. Even so, higher living costs, especially for housing and transport, continue to put pressure on household budgets, meaning many residents may not fully feel the benefit of this wage growth.

3. Kingston upon Hull

Hull ranks third, with average wages growing by 72.19%, resulting in a real-term increase of 25.81% once inflation is considered. The city’s recent focus on investment and job creation, especially in renewable energy and maritime industries, may be contributing to this positive wage trajectory. Nonetheless, the effects of inflation remain widespread, meaning that while wages have grown, affordability challenges persist.

Rebecca comments: “While it’s encouraging to see certain UK cities recording stronger wage growth, it’s important to recognise that inflation continues to erode spending power nationwide. Even in areas where pay is outpacing inflation, rising living costs, from housing to utilities, mean that many households are still feeling the strain. For small businesses, this environment presents both opportunities and challenges: higher wages can attract and retain talent, but they also increase pressure on margins. The key lies in finding a balance that supports employees without compromising long-term business sustainability.”

The UK industries with the highest wage growth

As inflation continues to shape the financial landscape, some sectors have fared better than others in keeping pay ahead of rising costs. But which industries are seeing the highest wage growth once inflation is factored in?

Rank	Industry	Total % wage growth from 2014 to 2024	UK CPI Rate from 2014 to 2024	Real (inflation adjusted) wage growth
1	Domestic Work and Household Employment	65.80%	33.34%	24.35%
2	Arts, Culture and Recreation	53.28%	33.34%	14.96%
3	Business Support and Administration	48.97%	33.34%	11.72%
4	Farming, Forestry and Fishing	45.97%	33.34%	9.47%
5	Retail, Wholesale and Vehicle Repair	45.85%	33.34%	9.38%

1. Domestic Work and Household Employment

Domestic Work and Household Employment ranks as the UK’s top industry for real wage growth, with average pay rising by 65.8% between 2014 and 2024, equating to a 24.35% increase in real terms once inflation is accounted for.

This sector covers roles such as cleaners, housekeepers, nannies, and carers employed directly by private households. The sharp rise suggests growing demand for in-home support, higher minimum wage enforcement, and labour shortages in domestic services.

2. Arts, Culture and Recreation

Arts, Culture and Recreation ranks second, with total wage growth of 53.28% over the past decade, translating to a 14.96% rise in real wages after inflation.

Spanning creative and leisure-focused professions like performers, artists, designers, filmmakers, and curators, this growth reflects the resurgence of the UK’s creative economy. Increased investment in media, arts, and entertainment has helped lift earnings, with cultural industries rebounding strongly after years of uncertainty.

3. Business Support and Administration

In third place, Business Support and Administration recorded a 48.97% wage increase since 2014, translating to an 11.72% rise in real terms once adjusted for inflation.

Encompassing roles such as administrative assistants, HR professionals, and payroll officers, this sector’s steady climb highlights a growing appreciation for operational and organisational expertise. As digitalisation and compliance demands expand, these roles have become more central to sustaining business performance.

The UK industries with the lowest wage growth

While some sectors have managed to stay ahead of inflation, others haven’t fared as well. But in which industries have wages failed to keep pace with rising costs?

Rank	Industry	Total % wage growth from 2014 to 2024	UK CPI Rate from 2014 to 2024	Real (inflation-adjusted) wage growth
1	Mining and Quarrying	18.89%	33.34%	-10.84%
2	Public Services and Defence	26.24%	33.34%	-5.32%
3	Property and Real Estate	26.54%	33.34%	-5.10%
4	Water, Waste and Recycling	32.74%	33.34%	-0.45%
5	Manufacturing and Production	33.85%	33.34%	0.38%

1. Mining and Quarrying

Mining and Quarrying ranks as the UK’s slowest-growing industry for wages, with pay rising by just 18.89% between 2014 and 2024, resulting in a 10.84% real-term decline once inflation is accounted for.

This sector includes jobs such as miners, drilling and blasting specialists, quarry machine operators, and geological technicians. The fall reflects a long-term contraction in the industry, with declining fossil fuel extraction, automation reducing manual roles, and lower investment in traditional mining operations. As the UK transitions towards renewable energy, many of these roles may have stagnated or disappeared, leaving those remaining in the sector facing limited pay progression and fewer opportunities.

2. Public Services and Defence

Public Services and Defence follow closely behind, with wages increasing 26.24% over the decade, a 5.32% real-term fall after inflation.

This broad sector spans essential public-facing roles, from civil servants and firefighters to police officers, local government staff, and members of the armed forces. Years of public sector pay freezes and below-inflation rises have eroded earnings, even as workloads and living costs climbed. While recent efforts have aimed to correct this imbalance, real wages remain below 2014 levels, leaving many vital workers with less purchasing power than a decade ago.

3. Property and Real Estate

Rounding out the bottom three, Property and Real Estate saw wages rise by 26.54% between 2014 and 2024, translating to a 5.10% decline in real terms once inflation is accounted for.

Including roles such as estate agents, property managers, surveyors, and lettings professionals, this drop is notably at odds with the UK’s booming housing market. The gap may stem from rising operational costs, tighter margins, and commission-based pay models impacted by slower transactions and interest rate hikes. Despite high property values, pay growth has failed to keep pace, underscoring the squeeze on profitability across the sector.

The countries with the strongest real wage growth

To understand how the UK compares on a global scale, we analysed data from the OECD to track how wages and inflation have changed across member countries over the past decade.

Rank	Country	Total % wage growth from 2014 to 2024	Cumulative inflation 2014 to 2024	Real (inflation-adjusted) wage growth
1	Latvia	124.16%	45.80%	53.75%
2	Lithuania	123.36%	51.94%	47.01%
3	Hungary	130.78%	65.01%	39.86%
4	Poland	101.22%	50.49%	33.71%
5	Slovenia	68.80%	26.64%	33.29%
6	Estonia	99.32%	53.27%	30.05%
7	Iceland	88.62%	48.99%	26.60%
8	Slovak Republic	71.20%	42.40%	20.23%
9	Portugal	42.36%	21.13%	17.52%
10	New Zealand	53.46%	30.88%	17.25%
11	Korea	39.85%	21.22%	15.37%
12	Czechia	74.05%	51.93%	14.56%
13	Luxembourg	38.34%	23.22%	12.27%
14	United States	44.35%	32.51%	8.94%
15	Ireland	30.75%	21.14%	7.93%
16	Denmark	28.23%	19.35%	7.43%
17	Germany	35.58%	26.46%	7.21%
18	Austria	42.51%	35.07%	5.51%
19	Switzerland	10.71%	6.24%	4.20%
20	France	24.42%	19.87%	3.80%
21	Belgium	36.40%	31.59%	3.65%
22	Sweden	36.91%	32.43%	3.38%
23	Norway	40.64%	36.53%	3.01%
24	United Kingdom	36.59%	33.34%	2.43%
25	Canada	30.93%	28.52%	1.88%
26	Spain	24.79%	22.85%	1.58%
27	Finland	23.45%	22.09%	1.12%
28	Mexico	60.37%	58.65%	1.08%
29	Japan	10.35%	11.32%	-0.88%
30	Australia	29.09%	30.73%	-1.26%
31	Netherlands	28.57%	31.09%	-1.92%
32	Italy	16.04%	20.87%	-3.99%
33	Greece	7.33%	15.82%	-7.34%

*Countries with a lack of data were removed from the research.

1. Latvia

Latvia leads the OECD for real wage growth, with average pay rising by 124.16% between 2014 and 2024, far exceeding the country’s 45.8% cumulative inflation.

This significant increase suggests a decade of strong economic momentum and successful wage reforms following EU integration. Rising salaries across the service and technology sectors, coupled with consistent economic expansion, have helped Latvians see one of the strongest gains in purchasing power across developed nations.

2. Lithuania

Lithuania follows closely behind, with average wages climbing 123.36% against 51.94% inflation, resulting in a 47.01% rise in real earnings.

Similar to Latvia, Lithuania’s impressive wage growth has been fuelled by rapid productivity gains, a thriving tech and manufacturing sector, and government policies aimed at closing the income gap with Western Europe. Despite this, the pace of inflation still presents challenges for lower-income households, where essential costs have risen faster than average pay.

3. Hungary

Hungary ranks third overall, posting 130.78% wage growth compared to 65.01% inflation, for a 39.86% real-terms increase. The rise reflects rapid industrial development and strong foreign investment, alongside a decade of steady minimum wage hikes. But with inflation swings and rising household expenses, much of that progress has been tempered by everyday financial pressure.

Together, these results highlight a broader trend across Central and Eastern Europe, where rapid economic development, foreign investment, and EU integration have fuelled faster wage growth than in more mature Western economies.

Where the UK Stands on a global scale

The United Kingdom places 24th overall, with wages rising by 36.59% against a 33.34% increase in inflation, leaving workers just 2.43% better off in real terms over the decade. This modest improvement highlights how closely wage growth and the rising cost of living have tracked each other when looking at a country-wide scale, leaving little real increase in purchasing power. Slower productivity growth, regional pay gaps, and ongoing cost-of-living pressures have all contributed to the UK’s performance compared with much of Europe.

6 ways for SMEs to navigate the pay pinch

Rebecca from Capital on Tap says: “The reality for many small business owners is that inflation isn’t just driving up prices, it’s reshaping how they operate. With wages, materials, and utilities all rising faster than turnover for many, SMEs need to focus on control, creativity, and cash flow to stay resilient.”

Here are six practical ways small businesses can stay ahead during the pay pinch:

1. Review cash flow weekly

With costs fluctuating and income streams tightening, keeping close tabs on your cash flow can reveal problems before they become crises. Simple measures like renegotiating supplier terms, adjusting payment cycles, or using short-term financing, such as a business credit card, to bridge temporary gaps, can free up much-needed working capital.

2. Prioritise staff retention

Recruiting and training new staff can cost more than retaining existing employees. Focus on engagement and flexibility. Small recognition schemes can build loyalty even when salary budgets are limited.

3. Plan ahead for wage increases

The National Living Wage is set to continue rising, so forecasting potential pay adjustments early helps avoid cash flow shocks. SMEs should align pricing and productivity strategies now to offset future increases rather than react under pressure later.

4. Automate to reduce overheads

Investing in digital tools, from accounting and invoicing platforms to AI-driven admin support, can cut costs and free up time for growth-focused work. Even small automations can make a measurable difference to margins over time.

5. Add value beyond pay

When wage rises aren’t feasible, find alternative ways to reward staff. Professional development opportunities, flexible schedules, or additional leave days can improve satisfaction and retention without significantly increasing payroll costs.

6. Keep communication open and transparent

During periods of financial strain, employees value honesty. Sharing your business’s challenges and growth goals helps foster trust and teamwork, and can motivate staff to support the company’s stability and success.

Rebecca concludes: “SMEs don’t have the same financial cushioning as larger firms, but they do have agility, and that’s their biggest strength. The businesses that adapt quickly, invest wisely, and look after their people will be the ones that not only survive this period but emerge stronger.”

Sources and methodology

To identify where real earnings are under the most pressure across UK industries and cities, and how the UK compares globally, Capital on Tap analysed wage and inflation data from the ONS, OECD, and Our World in Data using the following metrics:

Average gross annual pay by industry (2014–2024)– extracted from the ONS Annual Survey of Hours and Earnings. Wage growth (%) was calculated for each SIC07 (4-digit) industry over the 10-year period.
UK inflation rate (2014–2024)-– taken from the ONS Consumer Price Inflation (CPI) dataset. CPI values for 2014 and 2024 were used to calculate cumulative inflation (%). Industry wage growth was compared to CPI to determine real-term changes in pay.
Annual gross pay by city (2014–2024)– gathered from ONS data which reports pay by place of residence and local authority. Local authorities were mapped to corresponding UK cities to calculate percentage wage growth.
Global wage growth and inflation (2014–2024)– drawn from the OECD Average Annual Wages dataset and the Our World in Data CPI database. Average annual wages (in local currency) were compared against national inflation to calculate real-terms wage growth for each OECD country.
Cities, industries, and countries were ranked by real (inflation-adjusted) wage growth, by deflating nominal wage growth by the cumulative inflation rate (using the formula: ((1 + wage growth %) / (1 + inflation %)) - 1).

Note: Incomplete datasets and countries currently in conflict were excluded to ensure reliability and fair comparison.

The ONS city-level dataset used a cumulative CPI of 36.90% for its 2014-2024 analysis, while the ONS industry-level and OECD national-level datasets used a cumulative CPI of 33.34%.

Data collection took place in October 2025.

This does not constitute financial advice and is for informational purposes only. You should take your specific circumstances into account before making any financial decisions.

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