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According to recent official data from the Office for National Statistics (ONS), wage growth in the UK reduced to 4.5% during the period between September and November. This decline reflects a marked slowdown in pay rises within the private sector, which has experienced its slowest wage growth in five years. In contrast, wages in the public sector increased significantly, though the ONS suggested this was mainly because pay rises were implemented earlier compared to the previous year.
In the same timeframe, the number of individuals employed on company payrolls decreased by 135,000, with notable job losses in retail and hospitality sectors. This trend occurred despite the approach of the Christmas season, a period when employers typically increase hiring for shops and pubs. The average increase in wages, excluding bonuses, also slowed slightly from 4.6% in the preceding three months.
Sanjay Raja, Deutsche Bank’s chief UK economist, described the easing wage growth as “really encouraging” for the possibility of future interest rate reductions. Speaking on the BBC’s Today programme, he explained, “I know this sounds odd when we say lower pay growth is a good thing. But for a Bank of England that’s trying to control inflation…that is good. It allows the Bank to be more comfortable with the future path in terms of inflation getting back to that 2% target.” November’s inflation rate dipped to 3.2% from 3.4%, with December data forthcoming.
Analysts generally anticipate that the Bank of England will maintain its current borrowing costs at the February meeting of the rate-setting committee. The ONS figures highlighted a sharp divergence between public and private sector pay growth over the three months to November, with the former at an annual average increase of 7.9% and the latter at just 3.6%. ONS director of economic statistics Liz McKeown commented, “Wage growth in the private sector has slowed to its lowest rate in five years, while public sector wage growth remains elevated reflecting the continued impact of some pay rises being awarded earlier than they were last year.” Meanwhile, the unemployment rate held steady at 5.1%, the highest level observed since early 2021 amid ongoing recovery from the Covid-19 pandemic and lockdown disruptions
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