Britain’s wage growth is showing signs of losing momentum, with median annual earnings for full-time employees rising at their slowest rate in five years, according to official figures that
underline the challenges facing workers, employers and economic policymakers. Data published by the Office for National Statistics (ONS) show that the median gross annual salary for full-time employees reached £40,911 in April, an increase of 4.5% compared with the previous year. The growth rate was slightly below the 4.6% recorded a year earlier and represented the weakest annual increase since 2021, when the UK economy was emerging from the disruption caused by the COVID-19 pandemic.
The figures come from the ONS Annual Survey of Hours and Earnings, one of the country’s most comprehensive sources of information on pay levels and employment-related earnings. However, the slowdown in annual salaries does not tell the whole story. Separate measurements of weekly earnings suggest that wage increases have remained relatively strong in some parts of the labour market, highlighting the difficulty of assessing the underlying direction of pay pressures.
Weekly pay data indicate continued wage growth
The latest annual survey produced a stronger estimate of weekly earnings growth than an earlier ONS assessment based on a smaller sample. Average weekly earnings in April were 4.9% higher than a year earlier, compared with the 4.7% increase reported in the previous survey. The latest analysis drew on approximately 197,000 employee records, making it the largest sample used since the survey began.The results also revealed a considerable difference between full-time and part-time workers. Weekly earnings among full-time employees increased by 5.8% over the year, while part-time workers recorded growth of just 2.9%. The weaker performance among part-time employees was partly linked to a reduction in the number of hours worked, illustrating how changes in working patterns can influence overall earnings. These contrasting figures suggest that the pace of wage growth depends significantly on the measure being examined. Annual salaries, weekly pay and the number of hours worked can produce different pictures of employees’ financial circumstances, making it difficult to draw firm conclusions from a single headline figure.
Wage pressures remain important for the Bank of England
Developments in earnings remain a crucial consideration for the Bank of England as it determines whether inflationary pressures are easing sufficiently to bring inflation sustainably back to its 2% target. Strong pay increases can support household spending and help workers cope with higher living costs. However, if wages rise faster than productivity, businesses may face increasing labour costs and pass some of those expenses on to consumers through higher prices. Policymakers therefore continue to examine wage trends alongside productivity, services inflation and other indicators of domestic price pressures. The economic outlook has also become more uncertain amid tensions surrounding the US-Iran war, which have raised concerns about renewed increases in energy prices and the possibility of further pressure on household budgets. Recent ONS figures based on a smaller sample of businesses provide a different perspective on the direction of pay. Weekly earnings growth was reported at 3.1% year on year in August, while the increase over the three months to August reached 3.7%. The variations between these estimates and the annual survey reflect differences in measurement, reporting periods and the data used. Nevertheless, they underline the continuing importance of monitoring wages to establish whether inflationary pressures are genuinely weakening.
Managers benefit from the strongest pay increases
The survey also highlighted significant differences in earnings growth between occupational groups, indicating that the benefits of rising wages have not been distributed evenly across the workforce.
Managers recorded the strongest increase in weekly earnings among the full-time occupational groups examined, with pay rising by 6.7% over the year. By contrast, factory workers experienced the weakest growth among the groups highlighted, receiving an increase of 4.1%. The disparity points to differing pay trends across the British economy. Managerial positions have experienced stronger earnings growth, while workers in manufacturing have seen more modest increases. Such differences can reflect a range of factors, including employers’ demand for particular skills, recruitment difficulties, changes in business conditions and the bargaining power of employees in different sectors. For households facing persistent pressure from housing, energy and food costs, the practical impact of these increases will also depend on how wages compare with inflation.
Gender pay gap continues to narrow
The latest figures offered some positive news on workplace pay equality, with the gender pay gap among full-time employees declining to 6.8%, down from 7.2% a year earlier. The reduction indicates that the difference between men’s and women’s overall earnings has narrowed. However, the headline measure does not account for variations in occupation, qualifications, work experience or other characteristics that can affect salaries. It therefore cannot, on its own, establish how much progress has been made in addressing the underlying causes of pay inequality. The latest change nevertheless adds to the broader picture of a labour market in which earnings developments vary considerably between groups of employees.
Minimum wage announcement puts employers on alert
The publication of the salary figures comes as the UK government prepares to announce minimum wage rates for 2027 next week. The main adult minimum wage rate increased by 4.1% in April to £12.71 an hour. The next decision will be closely followed by employers, workers and organisations representing low-paid employees. For workers on the lowest incomes, a further increase could provide additional protection against the rising cost of essential goods and services. For businesses, however, higher statutory wage rates could increase operating expenses, particularly in sectors that rely heavily on lower-paid labour.
The eventual impact will depend on the size of any increase and how employers respond. Businesses may absorb higher costs, adjust prices, improve productivity or reconsider recruitment and working arrangements. The government will therefore face the challenge of balancing the objective of improving living standards with the need to maintain employment opportunities and avoid placing excessive pressure on employers.
A mixed picture for Britain’s economy
Taken together, the latest figures suggest that the UK labour market is entering a period of more moderate salary growth, although the evidence does not point to a uniform slowdown across all categories of employment. The five-year low in median annual salary growth indicates that pay increases are losing some momentum. Yet the stronger weekly earnings figures from the annual survey, alongside differences between full-time and part-time workers and across occupations, show that wage pressures remain uneven.
For the Bank of England, the key question is whether the moderation in pay growth will be sufficient to support a sustained return to the inflation target, particularly if energy prices or other external shocks push costs higher again. For employees, the central concern will be whether salary increases can keep pace with the cost of living. For employers, the challenge will be managing labour costs while maintaining competitiveness and supporting business growth. The coming months, including the government’s decision on minimum wage rates for 2027, will provide further indications of how Britain’s pay landscape is evolving and whether the slowdown in earnings growth translates into a broader easing of inflationary pressures.
