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UK Wage Growth Outpaces Inflation as Labour Market Faces Potential Strains

Wages grew 5.9% in the three months to January, surpassing inflation at 2.5%, while businesses brace for upcoming tax and wage policy changes.

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Liz McKeown, director of economic statistics at the ONS, said wage growth remained “relatively strong, with pay growth high in both the public and private sectors, despite the latter slowing slightly in the latest period”

Overview

  • Wage growth in the UK remained strong at 5.9% in the three months to January 2025, significantly outpacing inflation, which stood at 2.5%.
  • Vacancies rose by 1,000 to 816,000 in the three months to February, marking the first increase in over two-and-a-half years.
  • Payroll employment increased by 21,000 in February, reaching 30.4 million, reflecting modest labour market resilience.
  • The Bank of England is expected to hold interest rates steady at 4.5%, balancing inflationary concerns driven by wage growth with broader economic uncertainty.
  • Businesses express concerns over rising costs from upcoming increases in National Insurance and the minimum wage, which could strain the labour market and household budgets.