Pay increases granted by UK employers have slowed to their lowest level in three years, according to a new report by Incomes Data Research (IDR). The median pay rise in the three months to
February 2025 fell to 3.5%, down from 4.0% in the previous three-month period.
Overall pay settlements declined to 3.2%, marking the weakest level since February 2022.
The findings align with official data showing wage growth eased slightly to 6.1% in the three months to January, while inflation dropped more than expected in February. This trend may support the Bank of England’s plans to lower interest rates later this year, as it continues to monitor wage pressures. The central bank currently forecasts private-sector pay growth to slow to 3.75% by the end of 2025.
Zoe Woolacott, senior researcher at IDR, noted that April could see a temporary boost in median pay due to the recent increase in the minimum wage and developments in inflation and the labor market.
“Wage rises tend to lag inflation, so any upward movement in prices could eventually feed into higher pay awards,” Woolacott explained.
However, upcoming increases in social security contributions—effective April 6—may weigh on hiring. The UK’s budget watchdog recently cut its economic growth forecast for 2025 to 1%.
The IDR report is based on 75 pay awards affecting more than 230,000 employees between December 1, 2024, and February 28, 2025.