UK wage growth since the Labour takeover has remained a key economic topic, with earnings, inflation, employment rate, and payroll data closely monitored to assess real wage growth and living standards.
From August to October 2025, the public sector’s average annual rise in regular profits was 7.6%. This is an increase of 6.6% over the preceding three months.
Public Sector Wage Growth and Base Effect
However, a base effect results from some public sector pay increases being paid earlier in 2025 than in 2024, which has an impact on the public sector annual growth rate.
Wage growth is still sluggish.
Overall Earnings Growth and Average Weekly Pay
According to the ONS, workers’ average regular earnings increased by 4.5% in the three months ending in November, a modest decrease from 4.6% in the same period. According to the latest figures, the average regular weekly salary for UK workers is now £689, with a total pay of £741.
Wage growth was marginally greater (4.7%) when bonuses were taken into account, although the monthly decline was still 0.1 percentage points. Wages continue to grow faster than inflation, even when bonuses are taken out of the equation. Inflation was stubbornly high for a large portion of 2025 but is predicted to approach the 2% objective during 2026.
📊 UK Wage Growth Snapshot 2025
- Public Sector Growth: 7.6% (Aug–Oct 2025)
- Overall Regular Earnings: 4.5%
- Total Pay Growth: 4.7% (including bonuses)
- Average Weekly Pay: £689
- Total Weekly Pay: £741
- Real Wage Growth: 0.6%–1.9% above inflation
Real Wage Growth and Inflation Impact
This indicates that over the three months leading up to November, employees received real-term pay increases of about 0.6% on their regular earnings and 0.8% on their total earnings.
In the UK, the employment rate (which is calculated somewhat differently than the unemployment rate) increased from 74.9% in the three months before to October to 75.1% in the three months preceding November.
Employment Rate and Payroll Decline
According to ONS data, the number of payrolled workers decreased by 184,000 (0.6%) in the 12 months ending in December 2025. Between November and December, the number of payrolled workers likewise decreased month over month, falling by 43,000 (0.1%). In the year ending in December 2025, payrolls decreased by 184,000 (0.6%).
“The number of employees on payroll has declined again, with decreases over the last year concentrated in retail and hospitality, and reflecting ongoing sluggish recruiting activity,” stated Liz McKeown, the ONS’s head of economic statistics. In the meantime, the unemployment rate is still higher than it was for the quarter and the year, as reported last month.
Vacancies and Hiring Activity
“The overall number has stayed largely stable over the last six months, following a long fall, but there was a modest increase in vacancies in the most recent quarter.”
“The UK jobs market continued to deteriorate in the three months to November, highlighting the uncertainty that weighed on the economy in the run-up to chancellor Rachel Reeves’ Autumn Budget on November 26,” stated Alice Haine, a personal finance analyst at Bestinvest.
⚠️ UK Labour Market & Employment Update
- Employment Rate: 75.1%
- Annual Payroll Change: -184,000
- Monthly Payroll Change: -43,000
- Sectors Affected: Retail & Hospitality
- Hiring Trend: Weak but vacancies stabilising
- Key Issue: Sluggish recruitment activity
Economic Uncertainty and Employer Costs
Prior to the fiscal statement, employers were already dealing with increased labor costs and a weak economic environment, and persistent budget speculation only made matters worse. “As businesses and people battened down the hatches in expectation of future unwanted news, this constant stream of policy leaks undermined business confidence and hampered hiring activity.”
Long-Term Wage Stagnation and Productivity
According to Robert Pollin, co-director of PERI, the majority of American workers have seen pay stagnation since the 1970s, and this pattern has continued throughout the Trump administration.
The average nonsupervisory worker made $29.15 per hour in 1973 (in 2024 dollars). That average salary was $30.13 in 2024. The average productivity of American workers, or the average worth of what they generate when they arrive at work, increased by 150% during the same time period.
The average hourly wage for these workers now would be $72.88 if they had gotten annual raises between 1973 and 2024 that were only equivalent to their increased productivity and nothing more.
Nominal Wages vs Inflation
Indeed, earnings increased 1.9 percentage points more quickly than inflation between January 2025 and January 2026. While inflation was at 2.4%, nominal wages—the actual dollars earned regardless of living expenses—rose by 4.3%. When salary growth exceeds inflation, workers’ purchasing power has increased from the prior year.
According to an LSE election briefing, raising living standards requires reversing the trend of increased business control and decreased worker leverage in pay and working condition negotiations.
Living standards in the UK have stagnated after 15 years, and children’s odds of outperforming their parents have decreased.
Professor Stephen Machin identifies two causes of real wage stagnation in the most recent election report from the LSE’s Centre for Economic Performance (CEP), “Real earnings, inequality and living standards”: low productivity and a change in the balance of power from employees to employers.
The global financial crisis had a negative impact on productivity, which has not improved since. The primary cause of rising salaries and living standards is increased productivity. However, for any benefits to be felt, employers and employees must split them.
Frequently Asked Questions
1) How much have wages in the UK climbed since Labour came to power?
Depending on the industry, UK wages increased from 4% to 7.6% each year in 2025. Wages in the public sector increased more than those in the private sector as the year came to a close.
2) Are wages growing more quickly than inflation?
Indeed, real earnings increased by about 1.9 percentage points while nominal wages grew by about 4.3% and inflation was 2.4%.
3) What is the UK’s average weekly salary right now?
When incentives are taken into account, the average weekly salary increases to £741 from £689.
4) Is the employment market in the UK getting better?
Payroll employment has decreased by 184,000 over the course of the year, indicating lower hiring activity, despite the employment rate being steady at 75.1%.
5) What has caused the current slowdown in wage growth?
Even though earnings are still higher than inflation, hiring and pay growth have slowed due to economic uncertainty, increased employer costs, and a decline in company confidence.
Conclusion
UK wages have been increasing since Labour took office in 2024, and they are currently growing more quickly than inflation, providing workers with modest real-term pay gains. While total salary growth has steadily decreased near late 2025, public sector pay enjoyed larger gains.
Even while pay packages are marginally increasing, there are still more significant economic issues, according to declining payroll figures and low productivity. In the coming years, higher productivity and increased company confidence will be necessary for sustainable long-term pay rise.
Disclaimer: This article is for informational purposes only and is based on publicly available economic data and analysis. It does not constitute financial or investment advice.
