LONDON (Reuters) – Growth in pay awards by British employers held steady in the three months to October but is expected to cool in 2025, according to a survey on Thursday that showed firms under pressure from the new government’s decisions on tax and wages.
Human resources data firm Brightmine said the median pay award held at 4% for a fourth month in a row – down from 6% at the end of 2023 – and was set to drop to 3% next year.
The Bank of England is trying to gauge how much inflation pressure remains in the economy as it prepares to cut interest rates further.
It is watching closely for how companies respond to an increase in social security contributions which formed the centrepiece of finance minister Rachel Reeves’ first budget.
That kicks in from April next year – just as the minimum wage is due to rise by nearly 7% – and is likely to constrain pay award decisions by employers, Brightmine said.
“Managing workforce expectations will be critical in the coming year and employers should clearly communicate pay decisions to maintain employee engagement during times of financial restraint,” Brightmine senior content manager Sheila Attwood said.
The latest data was based on 24 pay awards covering 240,000 employees which came into effect between Aug. 1 and Oct. 30.