Wage Growth Stagnation in the UK

LONDON (Reuters) – Growth in pay awards by British employers stagnated during the three months to September, and firms expect average wage rises to cool over the coming 12 months, according to a survey that adds to signs that Britain's labor market is softening.

Human resources data company Brightmine reported on Wednesday that the expected median pay award for the year ahead is 3%, down from 6% in the same period in 2023, reflecting a sharp drop in inflation.

Pay rises held steady at 4% in the three months to September, the same as in August, although it is lower than the 4.8% increase in the second quarter.

Sheila Attwood, senior content manager at Brightmine, stated, "While pay awards are expected to decline in 2025, businesses are continuing to find creative ways to support their workforce, particularly by addressing skills shortages and retaining key talent."

These figures align with the Bank of England's forecasts of slowing wage growth. The Bank of England is monitoring the outlook for wages as it considers further interest rate cuts, expected to happen again on November 7 after reducing rates for the first time in over four years in August.

Governor Andrew Bailey indicated that the central bank might reduce borrowing costs more aggressively if inflation pressures continue to weaken. However, BoE policymaker Megan Greene advised a cautious approach due to the risk of longer-term inflation pressures.

Official data showed British inflation fell to a three-year low of 1.7% in September, while pay growth was at its slowest pace in over two years in the three months to August.

Brightmine noted that the median pay award in the public sector for the year to September stood at 5.5%, unchanged from August. The September data was based on 64 pay awards covering 433,000 employees, while the year-ahead forecast came from feedback from 289 organizations representing nearly half a million employees.