Pay progress in Britain picked up tempo on the finish of final yr, delivering welcome information for workers however posing a contemporary dilemma for the Financial institution of England.
Newly launched knowledge from the Workplace for Nationwide Statistics (ONS) reveals that complete pay climbed by 6% yr on yr within the remaining quarter of 2024—up from 4.4% in July to September—barely surpassing economists’ forecasts.
Common pay (excluding bonuses) grew by 5.9% in October to December, having stood at 4.9% within the previous three-month interval. Crucially, each measures outstripped inflation, lifting actual wages by 3.4% over the identical timeframe. Whereas this uptick will hearten many households, it might gas lingering anxieties on the Financial institution of England, which lower rates of interest earlier this month however stays cautious of ongoing inflationary pressures.
In keeping with the ONS, “Growth in pay, excluding bonuses, rose for a third consecutive time, with increases seen in both the private and public sector. After taking account of inflation, real pay growth also increased slightly.”
The newest jobs report gives a combined image. Employment for these aged 16 to 64 edged as much as 74.9%, whereas unemployment reached 4.4%, additionally ticking greater in comparison with the identical interval final yr. In the meantime, the financial inactivity fee fell to 21.5%, suggesting some people have returned to the workforce. The variety of folks claiming unemployment-related advantages in January 2025 rose to 1.75 million, up each month-to-month and yearly.
Economists had warned that rising borrowing prices may dampen wage progress, but sturdy demand for labour, coupled with low unemployment, has underpinned earnings. After pushing rates of interest to a 16-year excessive, the Financial institution of England decreased its base fee by 25 foundation factors this month, to 4.5%. Additional cuts are anticipated later within the yr. Nevertheless, if wage progress continues to surpass inflation, the Financial institution could discover itself below renewed stress to strike a fragile stability between stimulating progress and taming costs.
