Key facts
- UK annual wage growth, excluding bonuses, was 3.4% in the three months to May.
- Median pay awards across the UK economy held at 3.5% in the three months to May, according to an IDR survey.
- The National Living Wage increase in April supported pay awards in lower-paying sectors.
- Financial markets are pricing in potential interest rate hikes by the Bank of England by the end of 2026.
British annual wage growth, excluding bonuses, held steady at 3.4% in the three months to May, according to the Office for National Statistics. This figure met economists' expectations and matched the pace recorded in the preceding three-month period. Concurrently, data from Incomes Data Research (IDR) indicated that median pay awards across the economy remained at 3.5% for the fifth consecutive survey period. This sustained level of wage pressure is a key focus for the Bank of England as it monitors inflation. The IDR survey highlighted that the 4.1% increase in the National Living Wage in April contributed to bolstering pay awards in lower-paying sectors like care, hospitality, and retail. Additionally, manufacturing employers reported an uptick in higher-end pay deals, driven by pressures to recruit and retain staff. Financial markets are currently pricing in the possibility of one or two 0.25 percentage-point interest rate hikes by the Bank of England by the end of 2026, reflecting ongoing concerns about inflation. Recent data also showed the UK economy experienced slight growth in May, recovering from a dip in April. Businesses have expressed concerns regarding the Middle East conflict and a recent change in British political leadership, with Andy Burnham reportedly replacing Keir Starmer.