Published by Global Banking & Finance Review®
Posted on February 6, 2025
2 min readLast updated: January 26, 2026
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UK firms expect lower wage growth due to payroll tax hikes, as shown in a BoE survey. Employment growth expectations also declined.
LONDON (Reuters) - British companies' expectations for wage growth fell marginally in January and expectations for employment growth also declined in part due to a looming increase in payroll taxes, a survey from the Bank of England showed on Thursday.
The Decision Maker Panel showed businesses expected wage growth of 3.9% over the coming year in the three months to January, 0.1 percentage points lower than in the three months to December.
The BoE's Monetary Policy Committee said earlier on Thursday it expected pay growth to slow, based on signals including from the DMP survey, as it announced a quarter-point cut to its benchmark Bank Rate to 4.5%.
Over half of firms contacted in the DMP survey expected to cut staff and 38% thought they would pay lower wages due to the increase in employers' social security contributions announced by finance minister Rachel Reeves in her budget in October and which is due to begin in April.
Almost two thirds expected to lower their profit margins and 56% said they would raise prices in response to the change.
Companies' expectations for consumer price inflation in the year ahead inched up slightly, rising by 0.2 percentage points to 3.0% in the three months to January.
Firms expected to increase their prices by 3.9% over the next year, up from 3.9% in the three months to December.
(Reporting by Suban Abdulla; Editing by William Schomberg)
The article discusses UK firms' expectations for wage and employment growth, influenced by payroll tax increases.
Many firms plan to cut staff or lower wages due to increased payroll taxes starting in April.
Companies expect consumer price inflation to rise slightly, with prices increasing by 3.9% over the next year.
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