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UK wage growth slowed to 4.5% between September and November 2025, according to the Office for National Statistics, highlighting a significant deceleration in private sector pay.
Wages in private businesses rose by just 3.6%, marking the lowest increase in five years. Public sector pay grew by 7.9%, although the ONS noted this was likely influenced by pay awards being brought forward compared with the previous year.
The labour market also showed signs of cooling. The number of people on company payrolls fell by 135,000, with the largest reductions seen in retail and hospitality.
Youth unemployment for 16–24-year-olds remained high at 15.9%, while overall unemployment stood at 5.1%, the highest level since early 2021.
What this means for businesses
Economists suggest that slower private sector wage growth could ease inflationary pressures, potentially supporting further reductions in interest rates.
Although slower pay growth may relieve some wage pressures in the coming months, the planned increase to national minimum wage rates in April means hiring costs are unlikely to fall.
Reduced recruitment in retail and hospitality indicates that consumers may be feeling financial pressure, which could affect sales income for many businesses.
