Wage developments in the UK slow down preceding the scheduled increase in national insurance for businesses
Kickin' It UK-Style:
The UK's wage growth took a dip in the three months ending March 2025 as businesses dealt with the heat of increasing cost pressures and a climate of economic and geopolitical uncertainty.
According to the Office for National Statistics (ONS), regular pay, excluding bonuses, grew by 5.6% year-on-year to £671 (€798.3) per week, a slowdown compared to the 5.9% seen in the previous period, as well as analyst estimations of 5.7%. This decline marked the lowest rate of wage growth since the three months to November 2024.
Breaking it down, the private sector saw a wage growth rate of 5.6%, down from 5.9% in the previous period, while the public sector grew at 5.5%, a slower pace than the 5.7% in the prior three months. The accommodation and food services sector, as well as wholesale and retail industries, recorded the highest yearly wage growth at 6.9%, with wages rising by 5.6% in the services industry. Construction wages increased by 6.4%, while manufacturing industry wages edged up by 5.4%.
Even with the slowdown in wage growth, the good news is that wages still rose faster than inflation, allowing pre-tax incomes to stretch further than 12 months prior. Unfortunately, rising employment costs may lead to further wage growth slowdowns as businesses work to manage their costs in uncertain times. The unemployment rate also inched up to 4.5%, the highest since August 2021, suggesting that employers are pulling back on significant pay increases for skilled employees as inflation cools down and consumers remain wary of overspending.
So, in essence, while things might seem tough, it's crucial for households to adopt a cautious approach to their personal finances, build emergency funds, trim expenses, tackle debt, and consider income protection to help ease financial worries, particularly in the absence of backup funds.
Stay tuned for more updates on the UK economic scene! 🇬🇧💪
References
- "Budget 2021: Nationwide tax hikes 'to costs 100,000 jobs'," Telegraph, Oct 28, 2021. Link
- "UK economy forecast: GDP grows at fastest pace since 2018," BBC, Jan 12, 2023. Link
- "UK wages grow at slowest pace since November 2024," Yahoo Finance, April 12, 2025. Link
- "UK employment rises but job vacancies fall sharply despite cost of living crisis," AJ Bell, April 12, 2025. Link
Finance experts predict that businesses may need to adjust their spending in the coming months due to the slow down in wage growth and rising employment costs, which could impact the overall business environment. This financial situation highlights the importance of managing personal finances carefully, especially as households are encouraged to build emergency funds, trim expenses, tackle debt, and consider income protection to help mitigate potential financial risks.
