Real wages in London have slumped by 5.6 per cent since 2008, once inflation is accounted for, according to the latest figures for 2023. Only Nottingham has suffered a bigger drop in earnings, at 8.6 per cent over the same period.
Despite London generating over a fifth of Britain’s economic growth, analysts fear the capital’s wage woes could deter skilled workers. Paul Swinney of the Centre for Cities think tank warned that high earners have borne the brunt since the financial crash, leading to stagnant productivity in sectors such as banking, life sciences and tech.
Although the minimum wage has boosted pay for lower earners in other parts of the country, London’s flatlining productivity appears to have stifled wage growth. Mr Swinney said, “It is the million dollar question. We’ve had a huge boom in jobs but productivity has totally stopped growing.”
He also cautioned that worsening housing costs, coupled with lagging salaries, may push top talent towards rival cities such as New York or Paris. “London hasn’t done very well on the wage side. The cost of living has got worse, so it really squeezes those benefits of being in London,” he said.
The capital’s slump comes as City institutions continue to worry about transatlantic pay disparities: last year, David Schwimmer, chief executive of the London Stock Exchange Group, urged FTSE 100 companies to offer higher remuneration to attract senior executives amid intensifying global competition.
With Rachel Reeves and Sir Keir Starmer pledging to bolster the UK economy, Mr Swinney emphasised that reigniting productivity in London—alongside other regions—is key. He noted that while wages in cities like Newcastle and Liverpool also sit below 2008 levels, Glasgow’s earnings have grown by 9.1 per cent, indicating that recovery in some areas is possible if productivity can be restored.
