UK Pay Awards Reach 2-Year Low, IDR Survey Reveals

LONDON (Reuters) – Pay settlements granted by British employers remained at their lowest level in two years during the three months leading to August, a survey indicated, which may provide reassurance to the Bank of England as it considers potential interest rate cuts.

Incomes Data Research reported on Wednesday that the median pay settlement among major employers was stable at 4.0% for the second consecutive month. In the public sector, the median pay awards were higher at 4.5%, while the private sector experienced a slowdown, dropping to 4.1%.

Zoe Woolacott, a senior researcher at IDR, noted the contrasting results between the private and public sectors reflect the current pay cycle. The public sector is in a ‘catching-up’ phase after previously lagging behind private sector pay increases.

Following a parliamentary election victory in July, finance minister Rachel Reeves announced significant above-inflation pay rises totaling £9.4 billion for public sector employees, including teachers and medical professionals.

Recent official data revealed that private sector wage growth cooled to a two-year low of 4.9% in the three months ending in July. The Bank of England is closely monitoring wage trends and anticipates a drop in private sector pay to 3% by late 2025.

After cutting its key Bank Rate in August for the first time since 2020, the central bank held the rate at 5% during its meeting on September 19. A further reduction of a quarter point is projected for the November meeting.

The analysis from IDR involved 39 pay agreements impacting over 740,000 workers between June 1 and August 31.