UK pay growth accelerated to 5.2% in October, putting pressure on the Bank of England to resist calls for lower interest rates when policymakers meet later this week.
The Office for National Statistics (ONS) said annual growth in employees’ average earnings jumped after a significant rise in wages paid for skilled workers in the manufacturing sector.
Wages rose 4.4% including bonuses and 4.9% excluding bonuses in the three months to September, but both hit 5.2% in the three months to October.
The rise in pay for factory workers to 6% meant the split between civil servants and private sector employees widened. Annual average regular earnings growth was 5.4% for the private sector and 4.3% for the public sector, the ONS said.
The ONS director of economic statistics, Liz McKeown, said: “After slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay.
“Pay growth including bonuses increased by more, but this reflects previous figures being affected by the one-off payments made to some public sector employees in 2023.”
Monica George Michail, an economist at the National Institute of Economic and Social Research, said the combination of high average pay growth and low inflation meant most workers were enjoying significant real income gains.
“However, given the slowdown in recruitment activity and rising unemployment, we expect wage growth to slow in the coming months, although the rise in national living wage in April would exert some upward pressure.
“We expect the Bank of England to gradually cut rates in 2025 as wage growth moderates and inflation stabilises.”
City traders adjusted their expectations for UK interest rate cuts after the release of the ONS figures. Financial markets indicated there was just a 7% chance that the Bank of England will cut interest rates on Thursday, down from about 15% on Monday.
after newsletter promotion
Interest rates, now at 4.75%, are expected to fall to about 4.1% in December 2025.
The ONS said real incomes – the difference between inflation and wage rises – had risen by 2.2% over the past year when using the consumer prices index including owner occupiers’ housing costs.
Early estimates of the total number of employees in November showed a fall of 35,000 but this came after a rise of 24,000 in October, indicating that the jobs market remains stable after Labour’s budget.
There were 818,000 job vacancies in September to November 2024, down 33,000 on the previous three months, although still 22,000 above levels before the Covid pandemic.