£3K pay rise needed to keep pace with inflation

NEW research by peer to peer real estate investment platform, easyMoney, reveals that the average annual UK salary would need to increase by £3,000 in order to keep pace with inflation in 2023. But, many experts also point out that many small businesses will be unable to keep up, leading to lots of job losses and unemployment. This is the catch 22 we are all in now.

Not looking at if businesses and the markets can afford more pay rises, easyMoney has analysed historic annual changes in the average rate of inflation and the average salary in the UK to see how the size of today's gap between costs and earnings compares to previous years.

Inflation is the rate at which the price of goods and products increases over time. An inflation increase results in a reduction in the spending power of money. As such, an ideal world would see earnings and inflation increase at roughly the same rate. Unfortunately, this is rarely the case.

The data shows that in 2021, the average annual salary fell by -0.7% to £31,437. At the same time, inflation rose by 2.6%.

In 2022, earnings saw a promising uptick of 6.3% to reach an average of £33,402 per year. Unfortunately, 2022 also saw inflation rise by 9.1%

Based on the average rate of inflation for 2023 so far, it can be forecast that by the end of the year, the year on year increase will be a further 9%.

In order to match this increase with a complimentary 9% rise in earnings, the average salary would have to increase by £2,992 to reach £36,394 by the end of the year.

Even if the salary increase was based on the most recent monthly inflation rate (July 2023) of 6.8%, earnings must increase by £2,271 per year to keep pace.

To add further frustration to working people, the inflation pay gap is larger in some parts of the UK than others.

In Birmingham, year on year inflation currently sits at 10.8% while earnings have increased by 7.1%; a gap of just 3.7%.

Meanwhile, in Aberdeen, inflation is 10.2% while earnings have increased by just 3.7%; a gap of 6.5%.

In London, the gap is 6.3%, and in Glasgow it's 6%.

How can I close my inflation gap without a pay rise?

In lieu of a pay rise, you might want to find other ways of closing your personal inflation gap. One way to do this is to make the money you're earning, or your savings, work for you.

There are many ways to invest money, such as the stock market or buying property, but these tend to require huge sums of upfront cash to invest with. A far more accessible option is the world of ISAs.

The main selling point of ISAs is the personal ISA allowance which states you won't pay tax on the interest you earn from an ISA investment of up to £20,000.

There are various types of ISA to choose from. A traditional cash ISA is essentially a savings account for which different banks provide different rates of interest usually ranging between:- 4% to 6% annually. But even stronger returns can come from alternative ISAs, such as:- Innovative Finance ISAs (IFISAs).

An IFISA enables you to use your personal ISA allowance to invest in peer to peer lending and can generate really strong returns.

For example, easyMoney's property-backed IFISA generates average expected annual returns of 7.26% by matching a large number of individual lenders; each providing a small portion of the funds required; with a developer who wants to fund a new project.

Jason Ferrando, CEO of easyMoney says:- "Rising inflation is reducing the spending power of the pound and making everyone in the UK worse-off. On top of that, wage growth simply isn't keeping pace, making the situation even worse. With the economy as it is, many businesses and employers are reluctant to give sufficient pay rises because they're already concerned about surviving this period of financial stress. As such, those who are lucky or savvy enough to have some savings squirrelled away might want to look at using it to invest. Interest rates are climbing and while not every financial institution is passing this benefit onto savers, there are many avenues that are providing strong returns that could go some way towards easing the pressures of low pay and high inflation."

Earnings data sourced from the UK's ONS.
Inflation data sourced from the UK's ONS.

City by City data sourced from Centre For Cities - Cost of Living Tracker.

Thousands of tenants fear eviction

THE latest market analysis from property purchasing specialist, House Buyer Bureau, shows that thousands of landlords across Britain are selling up before their tenancy agreements have even ended, causing great uncertainty and potential eviction for the tenants who remain in-situ.

House Buyer Bureau analysed current for sale stock across the market in Britain and what proportion of this stock is listed for sale with tenants still in-situ who are yet to come to the end of their tenancy agreement.

Recent months have seen a landlord exodus from Britain's buy to let market due to rising mortgage rates making it more difficult than ever to earn a profit from rental income.

In fact, previous research has recently shown that buy to let mortgage arrears are worsening at a faster rate than they are for homeowners, demonstrating just how difficult it is for landlords at the moment.

As a result, it seems that thousands of Britain's landlords are putting their properties up for sale before their current tenancy has even come to an end.

In fact, House Buyer Bureau's new findings reveal that there are currently 12,518 properties listed for sale while still having tenants in situ.

20% (2,545) of these properties are for sale in the North West, while 17% (2,188) are listed in the South East.

Yorkshire & Humber accounts for 13%, followed by the East of England (12%), East Midlands (11%), and West Midlands (11%).

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:- "Landlords often get a lot of stick. Tenants see the price of rent going up and often assume it's the result of landlord greed, but this simply isn't the case. Certainly not anymore. Landlords; especially those who own just one or 2 properties; are facing mortgage cost increases that they simply cannot keep up with. And while some are trying to combat this by passing the cost onto their tenants, others are simply selling-up and getting out of the game. That's how bad it's become. As our research shows, thousands aren't even waiting until their existing tenants come to the end of their agreement. And while these tenants are legally entitled to stay put until the end of their tenancy agreement, they are effectively being sold as part of the house and their mid long term fate is to be decided by whosoever buys the property. This could mean that an eviction is on the horizon to make way for the new owner-occupier. It could mean that higher rent will be demanded. Whatever the outcome, it's causing unsustainable levels of stress and concern for renters at a time where stress and concern are already at a high. With the current economic picture remaining uncertain at best, there's a high chance that more buy to let properties will be up for sale, resulting in even less opportunities for tenants."

Sales listings data sourced from Rightmove:- Rightmove.Co.UK.
Tenant in-situ data sourced from Property Data:- PropertyData.Co.UK.

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