Costa Coffee, the UK-based coffee chain owned by Coca-Cola Co, has announced a 5% pay increase for more than 15,000 hourly-paid employees, effective from April 1.

The raise surpasses the UK’s current inflation rate of 2.5% and aligns with the government's upcoming increase in the national minimum wage.

The wage boost is expected to attract the attention of the Bank of England, which closely monitors pay trends as it weighs future interest rate decisions. Earlier this month, the central bank lowered interest rates by a quarter-point and continues to assess economic conditions.

Starting pay for Costa Coffee workers will rise from £12.00 to £12.60 ($15.87) per hour. This adjustment precedes the UK government’s 6.7% increase in the national minimum wage, which will see most adults earn at least £12.21 per hour from April.

Newly released official data indicates that UK pay growth accelerated in late 2024, suggesting a resilient job market despite broader economic challenges. This has contributed to the Bank of England's cautious approach to rate cuts.

Costa Coffee, which operates 1,500 company-owned stores, stated that experienced baristas would receive at least £12.93 per hour, with employees in central London benefiting from an additional £1 per hour.

The coffee chain joins other major retailers, including supermarket giants Sainsbury’s and Lidl GB, in offering above-inflation pay increases to support workers amid rising living costs. Photo by Wikimedia commons.