Private sector wage growth has fallen to its lowest point in nearly six years, despite growing concerns about inflation potentially being driven by higher earnings. New data indicates that private sector wages rose by 2.9 per cent in the three months leading up to July.
This figure marks the lowest rate since October 2020, when private sector wage growth stood at 2.4 per cent. In contrast, public sector wages increased by 6.3 per cent over the same period, with the Office for National Statistics (ONS) noting that public sector figures continue to be influenced by the timing of NHS pay awards.
Overall, average earnings, excluding bonuses, increased by 3.5 per cent, aligning with economists' expectations. Including bonuses, earnings saw a 3.9 per cent rise. The ONS also reported that the wider UK jobs market remained largely stable during the summer, with employment and unemployment figures showing little change.
The unemployment rate held steady at 4.9 per cent in the three months to July. However, the number of payrolled employees continued to decline, with an estimated 101,000 fewer people in work in July this year compared to July 2025. The number of job vacancies also decreased by 8,000, reaching lows not seen in approximately five years.
Bank of England officials closely monitor private sector wage growth as it can signal second-round effects, where rising pay can lead to increased consumer prices. The Bank's Monetary Policy Committee is scheduled to meet on Thursday to determine whether to adjust interest rates.