UK wage growth has remained unexpectedly strong, even as the job market shows signs of slowing. According to the Office for National Statistics (ONS), average weekly earnings excluding bonuses rose by 5.9% in the three months to January 2025.
This is well above the current inflation rate, meaning real wages are finally rising after years of being squeezed.
The labour market, however, is showing mixed signals. Job vacancies have increased slightly to 816,000, marking the first rise in over two years. Payroll numbers also grew by 21,000 in February, bringing the total to 30.4 million, while the unemployment rate held steady at 4.4%.
From April 2025, the National Living Wage for those aged 21 and over will rise by 6.7% to £12.21 per hour. Younger workers and apprentices will see even bigger increases, with some rates rising by over 16%.
These changes are set to boost incomes for many, but they also mean higher wage bills for employers.
While falling inflation has allowed real wages to grow, the Bank of England remains cautious. Persistent wage growth could make it harder to cut interest rates, as higher pay may eventually push up prices again.
Employers, meanwhile, are facing increased costs from both higher wages and National Insurance contributions, leading many to plan smaller pay rises for the year ahead.
ONS director of economic statistics Liz McKeown said: “Regular pay growth remains strong having increased slightly in the latest period.
“Growth accelerated in the public sector as previous pay rises fully fed through to our headline figures, while pay in the private sector was little changed.
“The latest survey results estimate that the unemployment rate is unchanged on the previous three months, while separately the number of employees on payroll fell slightly over the same period.”
Overall, the UK labour market remains resilient, but the combination of strong wage growth and rising business costs presents challenges. Policymakers and employers alike will be watching closely to see if these trends continue, or if the balance between pay, prices, and jobs begins to shift.
