Wage growth in the UK has remained robust at 5.8% for the three months to January, maintaining pressure on the Bank of England to maintain higher interest rates, which will be decided upon today.
Despite a slight decline, pay increases are still significantly outstripping inflation, reflecting ongoing efforts by employers to attract skilled staff with competitive salaries.
This figure of 5.8%, inclusive of bonuses, aligns with predictions from financial experts in the City and shows a real-term increase of 3.1% when adjusted for inflation during the quarter.
This marks the longest sustained period of wage growth exceeding 4% since the Office for National Statistics (ONS) started tracking this data in 2001.
As the Bank of England convened on Wednesday, this wage data would have been a key consideration, especially amidst rising unemployment rates and minimal economic growth in the past six months.
It is anticipated that interest rates will be held steady at 4.5% until their next review in May, provided wage growth remains strong.
Unemployment rates have held constant at 4.4% as of January, although the ONS has indicated potential significant revisions to this data due to challenges in gathering sufficient survey responses post-pandemic.
Suren Thiru, Economics Director at the Institute of Chartered Accountants in England and Wales (ICAEW), commented that the data reflects a decline in business confidence, suggesting that the UK job market is losing momentum.
Thiru noted that while higher wages could boost consumer spending—a vital component of economic growth—it might also slow the reduction of interest rates due to concerns about inflating prices further.
Moreover, upcoming changes in employers’ national insurance contributions could lead to slightly higher unemployment rates and more subdued wage adjustments, according to Thiru.
Excluding bonuses, earnings growth stood at 5.9%, with the private sector seeing a 6.1% increase and the public sector a 5.3% rise. The retail and hospitality sectors recorded the highest yearly wage increases at 6.3%, closely followed by construction at 6.2%.
These sectors have also seen significant employment declines, particularly in retail, where the British Retail Consortium noted a reduction of 249,000 jobs over five years, reducing the workforce to 2.88 million.
The ONS also reported a modest increase in job vacancies from the previous quarter to February, reaching 816,000, which is comparable to pre-pandemic levels.
