UK Employers Anticipate Slowdown in Wage Growth by 2025
In the United Kingdom, employer wage increases showed no signs of growth in the three months leading up to September, with businesses anticipating further slowdowns in average wage increases next year. This information comes from a recent survey by human resources data firm Brightmine, indicating a softening in the UK labor market.
The survey, released on Wednesday, predicts that the median expected wage increase for the next year will be 3%, down from the 6% wage increases recorded in the comparable period of 2023. This expected decline is seen in the context of a significant drop in inflation.
Wage increases remained steady at 4% in the three-month period to September, the same rate as the three months to August. However, this rate marks a decrease from the 4.8% increase observed in the second quarter. Despite the anticipated decline in wage increases for 2025, Brightmine's Senior Content Manager Sheila Attwood commented that companies are finding innovative ways to support their employees, particularly by focusing on skill shortages and trying to retain key staff.
The findings from Brightmine align with the Bank of England's (BoE) forecasts of a slowdown in wage growth. BoE, which closely monitors the wage outlook, is considering further reductions in interest rates. The central bank is expected to cut borrowing costs again on November 7th, following its first rate cut in over four years last August.
In early October, BoE Governor Andrew Bailey mentioned that if inflationary pressures continue to ease, the central bank may take more aggressive steps to lower borrowing costs. Conversely, BoE policymaker Megan Greene stated on Tuesday that a cautious approach is still warranted due to the potential for long-term inflationary pressures.
Inflation in the UK fell to a three-year low of 1.7% in September, and wage growth in the three months to August was at its slowest in more than two years.
For the year up to September, median wage increases in the public sector were reported at 5.5%, consistent with figures from the previous month. The September survey data was based on 64 wage increases covering 433,000 employees, while the forecast for next year was derived from the perspectives of 289 organizations representing nearly half a million workers.