London Daily

Focus on the big picture.
Tuesday, Oct 07, 2025

UK pay growth slows as Bank of England mulls rates pause

UK pay growth slows as Bank of England mulls rates pause

Growth in pay in Britain - which the Bank of England is watching closely as it weighs up whether to pause its run of interest rate hikes next week - lost pace in the three months to January, official data showed on Tuesday.

Basic pay, excluding bonuses, rose by 6.5% compared with 6.7% in the three months to December, representing the first slowdown in the that measure since late 2021.

Total pay grew by an annual 5.7% in the November-to-January period, slowing from 6.0% in the previous figures and the weakest increase since the three months to July last year, the Office for National Statistics said.

Economists polled by Reuters had expected basic and total earnings to rise by 6.6% and 5.7% respectively.

Britain's unemployment rate held at 3.7% in the three months to January, close to its lowest in almost five decades, the data also showed.

Economists polled by Reuters had mostly expected the rate to rise to 3.8%.


The BoE is expected to raise borrowing costs on March 23 by a further quarter of a percentage point to 4.25% although investors have cut their bets on such a move sharply after the collapse of U.S. lender Silicon Valley Bank.

Interest rate futures showed investors were putting the chance of the BoE pausing its rate hikes next week at about 40% at 0830 GMT while a quarter of a percentage point increase in borrowing costs was seen as a 60% possibility.

Yael Selfin, chief economist at KPMG UK, said while the ONS data showed a slowing of pay growth, more recent measures showed little change recently.

"Coupled with stronger-than-expected GDP data, this should provide enough evidence for the Bank to raise rates when it meets next week," Selfin said.

But Martin Beck, with forecasters the EY ITEM Club, said a BoE rates pause was now likely after 10 back-to-back hikes.

"These moves follow other developments, including an unexpectedly significant decline in the services sector inflation in January," Beck said.

Sterling rose against the dollar and the euro shortly after the data before falling back.

Finance minister Jeremy Hunt is expected to announce measures in his budget statement on Wednesday that will seek to get more people into work, easing the inflationary pressure in the labour market.

"The jobs market remains strong, but inflation remains too high," finance minister Jeremy Hunt said after the data was published, a day ahead of his budget speech.

"Tomorrow at the budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work."

Tuesday's data showed earnings were further diminished by an inflation rate that stood above 10% in January.

The ONS said basic pay, when adjusted for inflation using the consumer prices index, fell by 3.5%, one of the largest falls since records began in 2001. Total pay fell by 4.4% in real terms, the biggest drop since early 2009.


There were some signs of a further easing of the tightness in the labour market with the economic inactivity rate - measuring people out of work and not looking for it - falling by 0.2 percentage points to 21.3%, driven mostly by young people.

Vacancies decreased for the eighth time in a row in the three months to February, falling by 51,000 from the previous three months to 1.124 million.

Newsletter

Related Articles

0:00
0:00
Close
Three Scientists Awarded Nobel Prize in Medicine for Discovery of Immune Self-Tolerance Mechanism
OpenAI and AMD Forge Landmark AI-Chip Alliance with Equity Option
Munich Airport Reopens After Second Drone Shutdown
France Names New Government Amid Political Crisis
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
×