UK wage growth eased to 4.5% between September and November 2025, according to the Office for National Statistics, reflecting a notable slowdown in private sector pay.
Pay in private businesses rose just 3.6%, the lowest rate in five years. Public sector wages increased 7.9%, however, the ONS has said that this was likely due to pay awards being brought forward when compared with the previous year.
The labour market showed further signs of cooling. The number of people on company payrolls fell by 135,000, with the decline concentrated in retail and hospitality.
Youth unemployment for 16-24-year-olds remained elevated at 15.9%, while overall unemployment held at 5.1%, the highest since early 2021.
Are there any takeaways for businesses?
Economists have interpreted slower private sector pay growth as something that will ease inflationary pressures, which may help in further cuts to interest rates.
Slower private sector pay growth suggests that there could be some relief to wage pressures over the next few months, although with an increase to national minimum wage rates coming in April, hiring is unlikely to get cheaper.
The weaker hiring activity by retail and hospitality businesses suggests that consumers are feeling the pinch, which could have implications for sales income for many businesses.
With the festive season underway and household budgets feeling the pressure, it may be useful to know that if you are worried about paying your tax bill in one lump sum, you may be able to spread the cost.
The Institute of Chartered Accountants in England and Wales (ICAEW) has said that doing business in the UK is too uncertain and expensive, and more stability in the tax system is needed. Their comments were in response to the government’s call for evidence on how the tax system can better support entrepreneurs.