Pay gap at UK’s largest companies widens

Pay gap at UK’s largest companies widens

18 Dec    Finance News, News

The pay gap at the UK’s largest companies, which measures the difference in earnings between pay packets for chief executives and average employees, rose last year despite upward pressure on wages across the economy.

Data from the High Pay Centre, a think tank focused on pay and employment rights, found that the average pay differential at a FTSE 350 firm between chief executive and median employee was 57 to 1 in 2022, up from the 56 to 1 recorded in 2021.

The pay differential at the largest FTSE 100 companies was 80 to 1, according to the figures compiled by the think tank, which is funded by the asset manager Abrdn’s Financial Fairness Trust.

The figures show little progress in reducing the gap between the top-earning executives and their workers after some narrowing was reported during the pandemic.

Just over a fifth, or 21 per cent, of FTSE 100 bosses earned 100 times more than their average employee, according to the figures.

The largest pay differential in the FTSE 350 was at Safestore, a storage firm, where the chief executive was awarded more than 300 times the average worker’s pay. Darktrace, a cybersecurity company, and CRH, a construction supplies firm, had the second and third largest pay gaps respectively.

Sainsbury’s, Watches of Switzerland, Tesco and B&M were all in the top ten for the widest pay gaps, as retailers have “low rates of pay across their workforce, combined with high levels of chief executive pay common to all large companies”, the High Pay Centre said.

Tullow Oil, Jupiter Asset Management and Kainos, a software company, reported the smallest pay gap of around eight to nine times the average employee’s pay.

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JD Sports Fashion and the pub owner Mitchells & Butlers were still the listed companies with the lowest-paid employees, measured by the lowest quartile of its workforce.

Luke Hildyard, director of the High Pay Centre, said the UK’s largest listed companies needed to create a “fairer, more equal, more inclusive economy where companies create lots of well-paid jobs for all their workers, rather than a handful of obscenely paid roles for those at the top”.

He said: “The pay ratio trends highlight a moment of solidarity during the pandemic when CEO-to-employee pay gaps narrowed, but that seems to have been lost as gaps have widened to pre-pandemic levels over the subsequent two years.”

The figures come as Legal & General Investment Management said it would not set a ceiling on executive pay deals after concern in parts of the City that the UK’s largest firms cannot match the bumper pay packages offered by US rivals.

British workers have recorded the highest levels of nominal pay growth in over 20 years in 2023, but the real value of earnings is more modest as inflation erodes the impact of rising pay.

Average weekly earnings growth in the private sector, excluding bonuses, slowed to a rate of 7.3 per cent, according to the most recent official data, the weakest pace in nearly two years.

Paul Nowak, TUC general secretary, said top companies were “feather-bedding those at the top at the expense of the wider workforce”.

“At a time when food and energy bills are sky-high there is simply no justification for such huge pay inequality,” he said. “Corporate excess is bad for businesses and bad for Britain, often encouraging short-term risk-taking and greed over longer-term success.”

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