UK Public-Sector Pay Increases are now expected to outpace private-sector wages, a shift driven by recent pay raises approved by the new Labour government. A survey by the Chartered Institute of Personnel and Development (CIPD) revealed that public-sector employers plan median pay increases of 4% over the next year, up from 2.5% last quarter. In contrast, private-sector pay growth is expected to slow due to rising financial pressures.
Since July, Finance Minister Rachel Reeves has approved wage hikes of 4.75% to 6% for millions of public-sector workers, addressing wage gaps that developed during the pandemic.
However, private-sector employers face added costs from a £25 billion social security tax increase and a 6.7% rise in the minimum wage, potentially limiting wage growth, investment, and hiring.
The Bank of England is closely monitoring wage trends, with a recent slight interest rate reduction and expectations that annual growth in weekly earnings will slow. This shift underscores the challenges for both employers and policymakers in balancing wage and inflation dynamics while ensuring economic stability.
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