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UK wage growth slowed in the three months to November as employers cut headcount in the run-up to the Budget, according to official data that will help to reassure the Bank of England that inflationary pressures are easing. 

Annual growth of 4.5 per cent in average weekly earnings, excluding bonuses, was in line with analysts’ expectations and down from 4.6 per cent in the three months to October.

Private sector wage growth, which BoE policymakers view as a key indicator of underlying inflationary pressure in the economy, slowed more sharply to 3.6 per cent excluding bonuses in the three months to November, down from 3.9 per cent the previous month.

Public sector wage growth was higher at 7.8 per cent, partly because pay awards were made earlier this year than in 2024.

The unemployment rate remained at 5.1 per cent, hovering at its highest level since early 2021, following a long period of weak hiring.

The Office for National Statistics said on Tuesday that payroll employment was 155,000, 0.5 per cent lower than a year earlier, in the three months to November. The redundancy rate was up 1.1 percentage point at 4.9 per cent.

Provisional figures showed a further fall of 43,000 or 0.1 per cent in payroll employment in December, following chancellor Rachel Reeves’ tax-raising Budget, although these figures are provisional and likely to be revised.

However, evidence that workers are losing bargaining power may not be enough to persuade the Monetary Policy Committee to cut interest rates from their current level of 3.75 per cent when it next meets in February.

Ashley Webb, at the consultancy Capital Economics, said that with headline wage growth relatively stable, despite the sharper fall in private sector earnings, “the next policy meeting in February may be too soon for another interest rate cut”.

She added that this could change if inflation data due on Wednesday proved much weaker than expected and “pushed ajar” the door for a cut.

Yael Selfin, chief economist at KPMG, also said the more hawkish MPC members were “likely to argue that there is no immediate sign of a significant deterioration in the labour market”, although the figures “should create room for interest rate cuts in subsequent meetings”.

In a more positive sign, a long-running decline in vacancies levelled out, with the number of job openings rising by 10,000 in the three months to December compared with the previous quarter.

Employers’ cuts in staffing have been concentrated in sectors such as retail and hospitality, which employ large numbers of young people and were hardest hit by last year’s increases in national insurance contributions.

A rise in youth unemployment has prompted ministers to focus on help for those who are struggling to enter the jobs market, launching a review into the causes of youth inactivity and trialling a new scheme offering state-funded work placements for 18- to 21-year-old benefit claimants.

The Department for Work and Pensions said on Tuesday that it was set to open applications for employers to deliver these placements, with an initial rollout to 1,000 young people before national expansion.

Pat McFadden, minister for work and pensions, said Tuesday’s data showed “why we must go further, especially for our young people”.

He urged employers “to come forward” and join companies such as JD Sports and Tesco that had already committed to the scheme.

The pound was up 0.4 per cent after the data against a broadly weaker dollar at $1.348.

Additional reporting by Ian Smith