UK wages experienced their sharpest rise in three years, with the private sector taking the lead. According to the Office for National Statistics (ONS), between September and November 2024, average pay increased by 3.4% compared to the previous year, accounting for inflation. 

Private sector wages outpaced public sector wages, pushing average weekly earnings to £660 in November. Inflation fell to 2.5% last month, down from 2.6%, prompting speculation that the Bank of England will cut interest rates from 4.75% to 4.5% in February.

However, the UK’s economic outlook remains mixed. Unemployment increased to 4.4%, while job vacancies dropped 2.9% to 812,000 in the final quarter of 2024 – still above pre-pandemic levels. The ONS urged caution when interpreting these figures due to low survey response rates.

Meanwhile, tax increases on businesses, including higher National Insurance and reduced thresholds, are straining employers. Chancellor Rachel Reeves’ measures, aimed at addressing economic stagnation, have sparked warnings that rising costs could limit job creation and pay increases.

Worker shortages in key sectors continue to influence pay, with employers offering higher wages to attract and retain talent. The Resolution Foundation hailed 2024 as the best year for wage growth since 2005, as regular pay grew by 5.6% annually, with real-term increases at 3.4%. 

Work and Pensions Secretary Liz Kendall emphasised the need to boost employment to sustain this momentum, citing the jobs market as a priority for economic growth.

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