Private sector pay growth slows to five-year low
UK wage growth eased to 4.5% between September and November 2025, according to the Office for National Statistics, reflecting a notable slowdown in private sector pay.
Pay in private businesses rose just 3.6%, the lowest rate in five years. Public sector wages increased 7.9%, however, the ONS has said that this was likely due to pay awards being brought forward when compared with the previous year.
The labour market showed further signs of cooling. The number of people on company payrolls fell by 135,000, with the decline concentrated in retail and hospitality.
Youth unemployment for 16-24-year-olds remained elevated at 15.9%, while overall unemployment held at 5.1%, the highest since early 2021.
Are there any takeaways for businesses?
Economists have interpreted slower private sector pay growth as something that will ease inflationary pressures, which may help in further cuts to interest rates.
Slower private sector pay growth suggests that there could be some relief to wage pressures over the next few months, although with an increase to national minimum wage rates coming in April, hiring is unlikely to get cheaper.
The weaker hiring activity by retail and hospitality businesses suggests that consumers are feeling the pinch, which could have implications for sales income for many businesses.
A leading think tank has criticised the fiscal rules that the Chancellor uses to determine the government’s tax and spending plans. The Institute for Fiscal Studies (IFS) has suggested that reducing complex finances to a pass‑or‑fail number misses the bigger picture.
With just a few weeks to go until the beginning of a new tax year, a new round of tax changes take effect from April 2026. While many people won’t see a big difference in their day-to-day tax position, there are some areas worth having on the radar.
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