British Employers Plan Pay Cuts in 2025

LONDON (Reuters) – British employers are set to reduce pay increases next year, as revealed by a recent survey. This trend might provide additional confirmation for the Bank of England (BoE) regarding easing inflation pressures in the economy.

According to the Incomes Data Research survey, nearly two-thirds of employers plan to offer smaller pay raises in 2025 compared to 2024. In a prior survey last year, 53% indicated similar intentions to reduce pay increases.

The BoE maintained interest rates at 5% after a cut in August. It is closely monitoring wage growth as it cautiously considers further reductions in borrowing costs.

The IDR highlighted that 45% of organizations aim to raise salaries by 3% to 4% in 2025. This comes as the labor market softens and inflation shows signs of weakening.

The survey, conducted among 100 employers, revealed that 72% were from the private sector. It also noted that the median pay settlement for major employers fell to 4.0% in the three months ending in July, the lowest since August 2022, down from 4.8% in the previous three months.