UK wage growth eases and payrolls drop

Wage growth in the UK eased to 4.5% between September and November, official figures suggest, following a sharp slowdown in private sector pay increases.

The pace of pay growth for those employed by private businesses slowed to the lowest rate in five years, according to the Office for National Statistics (ONS).

In contrast, public sector workers saw their wages jump but, the ONS said, this was likely due to pay rises being awarded earlier than in the previous year.

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

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

The ONS data showed a stark contrast between public and private pay growth in the three months to November.

Annual average public sector pay growth was 7.9% compared to 3.6% for the private sector.

Liz McKeown, director of economic statistics at the ONS, said: "Wage growth in the private sector has slowed to its lowest rate in five years, while public sector wage growth remains elevated reflecting the continued impact of some pay rises being awarded earlier than they were last year."

The unemployment rate remained at 5.1% between September and November, which is the highest since early 2021 when the UK and the world were still grappling with Covid-19 and lockdowns.

At the same time, the number of people on company payrolls fell by 135,000 compared to the previous year.

A provisional estimate for December showed a 43,000 drop in payrolls compared to November when Chancellor Rachel Reeves announced the Budget.

Although, the ONS said the December figure should be treated with caution as it could be revised as new data is published.

McKeown said the decline in workers on payroll was "concentrated in retail and hospitality" which, she said, reflected "ongoing weak hiring activity".

The unemployment rate for 16 to 24-year-olds - traditionally a rich labour pool for pubs, restaurants and shops - remained close to a 10-year-high at 15.9% between September and November.

Yael Selfin, chief economist at KPMG UK, predicted that the overall unemployment rate could increase in the coming months.

"Forward-looking survey evidence points to employers continuing to signal their intention to reduce hiring, with higher employment costs dampening labour demand," she said.

The government increased National Insurance costs for employers from 13.8% to 15% of a worker's earnings.

It also lowered the threshold at which firms begin paying the tax on an employee's salary from £9,100 per year to £5,000.

The minimum wage has also increased and will rise again in April.

The government is attempting to help people into - or return - to work by expanding the WorkWell scheme by three years.

The scheme helps disabled people and those with health conditions to access physiotherapy, counselling and workplace adjustments.

Secretary of State Pat McFadden for Work and Pensions said the WorkWell pilot had helped 25,000 people to stay in or return to work.

Gabriel, 23, has a first-class degree in the performing arts but pursuing a career has not been easy. He has cerebral palsy which can cause spasms so painful that he cannot get out of bed for days at a time.

​​Over the summer, Gabriel spent a month on the WorkWell scheme, where he received physiotherapy and was given advice about how to thrive at work. He is currently paid to work one day a week at the performing arts company Haringey Shed.

"It's given me confidence, talking about the working environment and how you conduct yourself, how you talk to people," he said.

Additional reporting by Faarea Masud and Zoe Conway