MNI INTERVIEW: UK Wage Growth To Slow - Brightmine's Attwood
MNI (LONDON) - Despite upward pressure from National Insurance increases and a rise in the minimum wage, overall UK pay rises are expected to slow in 2025, Brightmine’s senior content manager for data and HR insights Sheila Attwood told MNI.
“Businesses are feeling financial pressure as we kick off the beginning of the year and are looking for creative ways to minimise the [policy] impact on employee pay packets -- whether that’s passing costs onto consumers or reducing the number of employee hours worked especially for entry-level, National Living Wage jobs,” she said.
“However, despite these precautions, there’s undoubtedly pressure on businesses, which is being reflected in the pay rises we’re expecting to see given this year,” she said, adding that pay deals for 2025 are set to fall below the 2024 median growth rate of 4.5%. (See MNI INTERVIEW: UK Minimum Wage Hike Poses Jobs, Prices Risk )
According to Brightmine’s latest data, negotiated pay rises for the three months to the end of December eased to 3.3%. This follows a sluggish second half of 2024, as pay rises stalled in Q3, before negotiated settlements showed wages actually dropped in November and December.
Overall earnings rose 5.6% in the three months to November, following a surprise upward revision to monthly data for October. This was above the Bank of England's expectations for Q4, though it has already expressed uncertainty over recent labour market data, and the Office for National Statistics has itself warned that its numbers may not be accurate. (See MNI BRIEF: UK Earnings Growth Picks Up In November )
"Early insights into January 2025 pay awards reflect the broader impact of the UK’s current economic conditions and shifting government policies,” Attwood said. "There is a clear view of emerging trends in employee compensation for 2025.”
EMERGING TREND
Early settlements data imply a median basic pay increase of 3.5% for January 2025, Attwood noted, with "the most frequent award value 2%, closely followed by 3% and 3.5%."
Brightmine’s latest pay forecasts survey, watched by the BOE as an outside source of data, adds further context, with the median prediction from 289 organisations at 3% for 2025 as a whole.
"These findings reflect a cautious approach to pay awards this year, shaped by the broader economic landscape and organisational strategies," Attwood said.
The Bank of England currently sees earnings growth slowing in 2025, with the November projections round pointing to an average rate of growth of 3.25%. Financial markets saw little in Tuesday's data to shift market pricing that currently sees between two and three BOE rate cuts this year, with a 25bp cut in February as good as priced in.