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London has suffered the deepest fall in real wages of nearly all major UK cities since 2008, fuelling concerns that the capital risks losing out on global talent.
Wages in the city have nosedived since the financial crisis, with the average worker making 5.6pc less once accounting for inflation, according to the latest figures for 2023.
The plunge is more pronounced than in almost every major city, despite London generating more than a fifth of the UK’s economic growth.
Only in Nottingham have workers experienced a steeper fall in earnings, with wages falling by 8.6pc between 2008 and 2023.
Paul Swinney, of the Centre for Cities think tank, said the drop in real wages in London highlights the impact on high earners since the financial crash.
Mr Swinney said: “Those people who are doing higher paid jobs are the ones where the real wage decline has really hit, which tallies with the fact that it is the cutting edge of the economy that’s not doing very well.”
Meanwhile, rapid rises in the minimum wage have helped boost pay across cities with a greater share of lower-paid workers.
Experts are still unsure why the capital’s wages have struggled to grow but it points to the wider challenges gripping Britain’s sluggish economy.
Mr Swinney said: “It is the million dollar question. The main reason is because productivity has flatlined in London. We have had a huge boom in jobs available in the capital but productivity has totally stopped growing.”
The blow to pay packets is a symptom of industries like banking, life sciences and tech struggling with productivity, he said, which has impacted wage growth.
The bleak trajectory for London’s wages means it is likely losing out in the competition for top talent, Mr Swinney warned, including to the likes of the US.
He said: “What we have seen is that London hasn’t done very well on the wage side. The cost of living has got worse from a housing perspective in particular over the last 15 or so years. So it really squeezes those benefits of being in London.”
He added: “The data seems to suggest that there’d been a real slackening off of people coming from skilled countries in particular, which then you would think will be having an impact on the performance of London’s economy.”
It suggests that top talent are to a greater extent looking to cities like New York or Paris rather than London.
It comes amid complaints from the City over the widening gulf in salaries for FTSE 100 bosses compared with their US peers.
David Schwimmer, the head of the London Stock Exchange Group, last year warned Britain’s largest companies that they must pay chief executives more if they are to compete for talent.