Wage growth has slowed due to decline in the number of people employed & more related News Here

Pay growth in the UK slowed to 4.5% between September and November following a sharp slowdown in private sector pay growth, official data showed.

The pace of wage growth for people working in private businesses has fallen to the slowest in five years, according to the Office for National Statistics (ONS).

In contrast, public sector workers saw their wages rise, but, the ONS said, this was likely due to pay rises being given earlier than last year.

Meanwhile, the number of people on company payrolls continued to fall, with particular declines in shops and hospitality – down by 135,000 in the three months to November.

It came as the economy was heading towards the key Christmas season when companies traditionally employ more pub and shop staff.

Average wages, excluding bonuses, slowed from the 4.6% increase recorded between August and October.

Sanjay Raja, chief UK economist at Deutsche Bank, said the easing of wage rises is “really encouraging” given the possibility of future interest rate cuts.

“I know it sounds strange when we say low pay rises are a good thing,” King said on the BBC’s Today programme. “But for the Bank of England that is trying to control inflation…it is good.

“This allows the Bank to be more comfortable about the future path in terms of inflation returning to its 2% target.”

Inflation – which measures the pace of price increases – eased to 3.2% in November from 3.4%. The ONS will release December data on Wednesday.

Higher wage growth generally increases inflation because consumers demand more goods and services and can pay more for them. The Bank of England uses higher interest rates to counter this, but can cut them if there is less demand in the economy.

Since August 2024, the Bank of England has cut interest rates six times, most recently in December when borrowing costs were cut from 4% to 3.75%.

Economists widely expect the Bank of England to cap borrowing costs in February when the rate-setting committee meets for the first time this year.

ONS data showed a wide gap between public and private wage growth in the three months to November.

The public sector’s annual average wage growth was 7.9% compared to 3.6% for the private sector.

Liz McKeown, director of economic statistics at the ONS, said: “Private sector pay growth has reached its lowest rate in five years, while pay growth in the public sector remains high, reflecting the continuing impact of some pay rises given earlier than last year.”

The unemployment rate remains at 5.1%, the highest since the beginning of 2021 when Britain and the world were still grappling with COVID-19 and lockdowns.