Regional pay gaps fell under Starmer government

The Starmer Government has bequeathed a mixed record on the labour market to new Prime Minister Andy Burnham. 156,000 payrolled jobs have been lost and unemployment is 0.8 percentage points higher, but real pay packets have increased by £7 a week and gaps between the highest and lowest paying areas of the country having shrunk, the Resolution Foundation said today (Tuesday) in response to the latest labour market statistics.

The latest ONS data shows that the labour market is currently in a depressing holding pattern, with the unemployment rate stuck at 4.9 per cent and overall real wage growth weak at just 0.3 per cent. Private sector wage growth continues to fall, however, and has been shrinking in real terms since October.

Looking at the record of the Starmer government since July 2024, the UK has performed poorly on jobs, but better on pay.

Levels of payrolled employment have fallen by around 156,000, while unemployment has risen from 4.1 per cent to 4.9 per cent.

Average weekly earnings continue to rise faster than inflation, growing by £7 a week over the period, from £692 to £699. However, if current tensions in the Middle East mean that inflation rises over the second half of the year, workers should brace themselves for yet another period of shrinking pay packets.

There has been good news on regional wage differences. Real pay growth in lower-paying regions such as Yorkshire and The Humber and the North East have outpaced London and the South East since the election. The gap in real pay between London and Yorkshire and The Humber has fallen by £15 since July 2024.

Hannah Slaughter, Principal Economist at the Resolution Foundation, said:

“The labour market has settled into a depressing holding pattern in mid-2026, with unemployment hovering close to five per cent and real wages shrinking in the private sector.

“Looking at the period of the Starmer government, the labour market has shed around 156,000 payrolled jobs, with unemployment rising as a result, while real wages have grown by £7 a week.

“Perhaps the most welcome legacy for the incoming Prime Minister has been falling regional pay gaps, with low paying areas like Yorkshire and the North East performing far better than London.”