A growing number of UK employers are planning to reduce pay increases in 2025, according to a recent survey by Incomes Data Research (IDR), potentially signaling

easing inflationary pressures that could support the Bank of England’s efforts to manage economic stability.

Nearly two-thirds of employers surveyed intend to offer smaller pay raises in 2025 compared to 2024, marking an increase from last year when 53% of employers planned similar reductions.

The Bank of England, which held interest rates at 5% on Thursday after lowering them in August, is keeping a close eye on wage growth as it cautiously approaches further cuts to borrowing costs.

According to IDR, 45% of surveyed organizations plan to raise wages by 3% to 4% in 2025. This comes as the job market's candidate shortage begins to ease slightly and inflation continues to weaken.

The survey, which included responses from 100 employers, found that 72% of respondents were from the private sector. Earlier this month, IDR reported that the median pay settlement among major employers had fallen to 4% in the three months leading up to July, the lowest since August 2022 and down from 4.8% in the previous quarter. Photo by Phil Whitehouse, Wikimedia commons.