Breaking News: British Employers Hold Pay Settlements at Two-Year Low, BoE Considers Interest Rate Cut
In a recent survey by Incomes Data Research, it was found that pay settlements awarded by British employers remained at their lowest in two years during the three months leading up to August. This news could potentially influence the Bank of England's decision on whether to cut interest rates further.
The median pay settlement awarded by major employers held steady at 4.0% for the second consecutive month. However, there was a discrepancy between the public and private sectors, with public sector pay awards standing at 4.5% while private sector awards slowed to 4.1%.
According to Zoe Woolacott, senior researcher at IDR, the difference in pay outcomes between the two sectors is due to the public sector now catching up after a period of lagging behind the private sector. Finance minister Rachel Reeves recently announced above-inflation pay increases totaling £9.4 billion for public sector workers, following the Labour Party's victory in a parliamentary election in July.
Recent official figures revealed that British private sector wage growth hit a more than two-year low of 4.9% in the three months leading up to July. The Bank of England is closely monitoring wage growth and anticipates private-sector pay to slow to 3% by late 2025.
Having already cut its key Bank Rate in August for the first time in two years, the BoE held the rate at 5% on Sept. 19. However, it is expected to lower borrowing costs by a further quarter point at its upcoming November meeting.
The IDR analysis was based on 39 pay deals covering over 740,000 workers between June 1 and Aug. 31. With these insights, individuals should keep an eye on potential changes in interest rates and wage growth, as they could impact their personal finances and investments in the future.
