The governor of the Bank of England has warned that there are signs the UK jobs market is slowing because employers are adjusting hiring and salary policies in response to higher national insurance contributions.
Andrew Bailey told the British Chambers of Commerce trade conference on Thursday that there was evidence that “slack is opening up … especially in the labour market.”
He added that “the latest data on pay settlements and pay expectations point to a significant decline in wage growth in the year ahead.”
In the private sector, annual earnings in the private sector grew by 5.1% in the three months to April, as opposed to 5.9% in the three months to January.
Bailey said the Bank’s intelligence suggested that average pay settlements for 2025 will be 3.5 to 4% – in line with inflation forecasts.
Pay award decisions
Pay awards in real terms could fall for ‘prolonged period’
NI increase has not caused ‘knee-jerk reaction’ in pay awards
Employment dropped by more than 100,000 in May – the largest monthly fall in PAYE payrolls since May 2020, close to the start of the Covid period.
Uncertainty caused by the US import tariffs was likely to affect growth and weaken the economy in the year ahead, said Bailey.
Earlier this week, figures from Brightmine showed that the median pay award in the UK remained steady at 3% in May, with public sector pay awards outstripping the private sector. Brightmine said the 3% median stayed in place for the sixth consecutive rolling quarter as companies take a more cautious approach in the current economic climate.
Prime minister Keir Starmer also addressed the BCC conference, telling business leaders: “I want to begin by thanking you all because look, I fully acknowledge here that this year, as we’ve had to fix the foundations of our country, deal with the unprecedented mess that we inherited, we’ve asked a lot of you. I understand that.”
On the Employment Rights Bill he did not signal any further concessions but said: “I get the concerns”. Supporting the measures, that will introduce new workers’ rights, he said: “Many people have recognised that a secure, protected workforce is good for business; drives up productivity.”
Jonathan Reynolds, business secretary, told reporters at the conference that the government would address the “two principal concerns” of business – probation periods and access to zero-hour contracts – “not through any change of policy, but through our existing approach.”
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Latest HR job opportunities on Personnel Today
Browse more human resources jobs
