Steady 3% UK Wage Increases persist despite dismal April Performance
UK Pay Settlements Show Moderation in April 2025
According to data from Brightmine, the median of public sector pay awards has aligned more closely with private sector norms, remaining stable at 3% in the three months to the end of April 2025. This trend reflects a cautious economic recovery, with cost pressures and labour market slack impacting pay negotiations.
The UK economy grew by 0.7% in the first quarter of the year, a stronger than expected rebound after months of stagnation. However, the latest economic data show signs of growth, but this growth is not yet reflected in pay outcomes.
The median basic pay award in the UK remained stable at 3% in the same period. The public sector's higher median pay award is largely due to legacy deals agreed earlier in the pay cycle. In contrast, the private sector median stands at 3%, creating a gap between public and private sector pay awards.
Despite lower settlement percentages, wage growth remains above inflation for many groups. The most common pay award in the dataset is for a 3% increase. However, almost half of all pay awards now fall below the 3% mark. Approximately one in 20 pay deals in the latest quarter are pay freezes.
The labour market shows signs of loosening, with increased unemployment per vacancy and some firms not replacing all voluntary leavers. This slack likely contributes to moderated pay increases this year and may place downward pressure on future wage settlements.
Sheila Attwood, HR Insights and Data Lead at Brightmine, commented that the subdued pattern of pay settlements indicates that many employers continue to approach wage decisions with caution due to ongoing cost pressures. She expects public sector pay awards to mirror the more restrained approach seen in the wider economy.
The data also reveals that despite lower settlement percentages, wage growth remains above inflation for many groups. Notably, some individual deals have been significantly above average, such as the BBC Performer's pay increase around 13%.
Despite the cost increases that impacted both employers and households in April, including hikes in council tax, utility bills, and changes to National Insurance contributions, average weekly earnings growth remains robust, with a 5.2% year-on-year increase in regular pay reported up to April 2025. Adjusted for inflation (CPIH), real earnings grew modestly by about 1.1%, showing some real wage gains despite inflationary pressures.
In summary, the UK's pay settlement trends in April 2025 show a moderation from the steep increases seen during recent years of economic turbulence, with average rises around 3-4%. This reflects a cautious economic recovery with cost pressures and labour market slack impacting pay negotiations. Some firms use inflation-linked clauses to manage ongoing uncertainty, illustrating an adaptive pay-setting environment amid evolving economic conditions.
The subdued pattern of pay settlements in April 2025 suggests a continuation of cautious financial decisions by employers due to ongoing cost pressures within the business environment. The median pay award in both public and private sectors remained stable at 3%, indicating a moderated increase compared to previous years.
