LONDON (Reuters) – British pay growth accelerated in the last three months of 2024, according to official data published on Tuesday that underscored why the Bank of England has adopted a careful stance about when it will cut interest rates again despite a weak overall economy.
Private-sector pay excluding bonuses – the BoE’s main gauge of domestic inflation pressure – rose by 6.2% compared with the same period a year earlier, up from 5.9% in the three months to November, the Office for National Statistics said.
Sterling rose against the dollar immediately after the data release.
Employers say finance minister Rachel Reeves’ plan to increase the social security contributions they pay from April will lead to weaker hiring and slower wage growth.
However, the pace of pay increases has remained far above the levels consistent with the BoE’s 2% inflation target.
BoE Chief Economist Huw Pill said in an interview with Reuters last week that he believed the main problem weighing on Britain’s sluggish economy was one of supply – including a shortage of workers which has pushed up wages.
The ONS said pay growth across the whole economy, excluding bonuses, was 5.9% higher in the three months to the end of December than a year earlier, the strongest reading since the three months to April last year.
Including bonuses, pay was up by 6.0%.
A Reuters poll had pointed to both measures of wage growth rising by 5.9%.
(Writing by William Schomberg and Andy Bruce; Editing by Kate Holton)
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