From Underdog to Contender: The East’s Wage Growth Surge

It’s no secret that London’s dominance in the job market has been slipping. As growth in the capital tempers, previously overlooked regions are seeing strong growth. But it’s not just the North leading this charge; the East has also emerged as a standout player in the SME landscape. 

The Employment Hero Jobs report for August shows that compared to the UK capital, wage growth is up 12.2% in the North and 12% in the East year-on-year. London has seen wage growth too, but to a much lesser degree, with gains of 3.2%, roughly keeping pace with inflation, providing a view of wider trends across the jobs market.

Employment Figures Show a Downturn in London

Employment growth figures for London aren’t much better. In fact, they’re on the decline. In August, employment contracted -1.0% month-on-month, the lowest monthly change in 13 months. Year-on-year figures have also been dire. Employment declined from 3.6% in July to 1.2% in August, a massive shift from pre-June figures, which were in the double digits. Zooming out from the capital, the South is performing worse than any other region.

Why London is Slowing

There are a number of reasons for these shifts. Wage growth in London has slowed due to a combination of economic and structural factors. Productivity gains have also been weak, limiting employers’ ability to increase pay, and the city’s high cost of living and housing pressures reduce the real impact of nominal wage rises. 

A number of businesses are also relocating roles to more affordable regions, or offering remote work, lessening competitive pressure on London salaries. At the same time, policy and employment cost pressures after last year’s Budget also further constrained pay increases, with worries over this year’s Budget also impacting the market. 

A Broader UK Job Market Picture

Of course, in a general sense, the job market is not at its strongest regardless of regional differences. But if these figures tell us anything, it’s that once things recover, this shift away from the capital may become more permanent. 

Nothing is guaranteed, Bart van Art, Professor of Productivity Studies at the University of Manchester, highlights. 

“To fully capitalise on their productivity potential, regions like the North must focus on mobilising their labour force more effectively.

“Without this, there’s a risk that productivity and wage gains benefit too few people, and could come at the cost of reduced employment and working hours, which would undermine a positive growth path forward.”

The East: Emerging as a Key Player

In the East, which hasn’t traditionally been a leading region in wage growth, maintaining this streak will be dependent on continued investment and business expansion as well as a wider pool of talent as the cost of living repels employees from more expensive areas like London. If these conditions are met, the East could solidify its position as a major employment hub, showing that opportunities and economic growth are no longer confined to the capital.