Published by Global Banking & Finance Review®
Posted on September 24, 2025
2 min readLast updated: January 21, 2026
Add as preferred source on GoogleUK employers maintain 3% pay settlements due to economic caution, impacting inflation and interest rates. Pay freezes are on the rise.
LONDON (Reuters) -Pay settlements granted by British employers held at 3% in the three months to August but many firms are now offering smaller rises in response to their higher labour costs, according to figures from data firm Brightmine.
Wednesday's figures extended the run of 3% pay awards that start in early 2025, the longest period of no change since 2019, Brightmine said.
BoE policymakers are watching for signs that inflation pressure in Britain's labour market is abating sufficiently for it to resume reducing borrowing costs. It held interest rates at 4% last week.
"With inflation still elevated and recruitment slowing, employers remain cautious in their approach to pay, balancing workforce needs against ongoing economic uncertainty," said Sheila Attwood, HR insights and data lead at Brightmine.
British finance minister Rachel Reeves, who ordered employers to pay higher social security contributions from April this year, is expected to raise taxes again in her annual fiscal statement on November 26 in order to remain on course to meet her budget targets.
Britain's consumer price index held at 3.8% in August. The BoE expects it to peak at 4% in September and stay above its 2% target until the spring of 2027.
The economy grew just 0.2% in the three months to July, and average weekly earnings, excluding bonuses, cooled slightly to 4.8% in the three months to July from 5% in the April-to-June period.
Brightmine said nearly 11% of pay settlements in the three months to August resulted in a pay freeze, after none were reported in the three months July.
The data firm analysed 34 pay settlements effective in the three months to August 31, covering more than 600,000 employees.
(Reporting by Suban Abdulla; editing by William Schomberg)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
The Bank of England is the central bank of the United Kingdom, responsible for setting monetary policy, including interest rates, and maintaining financial stability.
A pay freeze is a situation where employees do not receive any salary increases for a certain period, often implemented by employers during economic downturns.
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