Real pay rises at fastest rate since 2021

The average growth rate of real wages in the UK has reached its fastest pace in over three years, primarily driven by robust wage growth in the private sector. After accounting for inflation, average wages increased by 3.4% compared to the same period last year.

According to data from the UK Office for National Statistics (ONS), private sector earnings growth outpaced public sector wage growth during the September to November period. This trend is significant when compared to the same period last year.

Despite the risk of wage increases pushing up inflation, the Bank of England is still expected to cut interest rates next month. The current rate stands at 4.75%, but traders anticipate a reduction to 4.5% in February, following an unexpected drop in the inflation rate, which measures the speed at which prices rise over time, last month.

Liz McKeown, Director of Economic Statistics at the UK Office for National Statistics, stated that wage growth accelerated for the second consecutive period, again driven by strong growth in the private sector. She also noted that regular average annual wage growth was 5.6%, but considering inflation, the real wage growth rate was 3.4%.