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UK Employers Maintain Cautious 3% Pay Rises Amid Economic Uncertainty
19 Aug
Summary
- Private-sector pay deals in UK held at 3% in past 3 months
- Employers cautious due to economic uncertainty and possible tax hikes
- Bank of England watching pay growth closely as it considers interest rates
According to the latest Brightmine report, private-sector pay settlements in the UK have remained steady at 3% over the past three months, as of August 2025. This marks the eighth consecutive month that the median private-sector pay deal has been at this level, down from 4% in the same period last year.
Sheila Attwood, Brightmine's HR insights and data lead, explained that many employers are continuing to approach wage decisions cautiously, keeping pay rises at 3%, due to ongoing economic uncertainty and the looming autumn budget. Several businesses have reported being squeezed by April's tax increase, and there are concerns about a potential shortfall in public finances later this year.
The Bank of England is closely watching pay growth as it tries to determine when and whether to adjust interest rates again. The central bank reduced borrowing costs earlier this month but suggested it may move more slowly going forward due to inflation pressures.
Despite the stronger-than-expected 0.3% growth in the UK economy during the second quarter, many employers remain hesitant to offer larger pay increases. Brightmine's data is based on 19 pay settlements covering more than 600,000 employees in the three months to July 31.
