Finance
UK Wage Growth Cools by Less Than Expected in 3 Months to February
Published by Global Banking & Finance Review®
Posted on April 21, 2026
2 min readLast updated: April 21, 2026
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In the three months to February, UK regular wage growth (excluding bonuses) eased to 3.6% year-on-year—slightly above the 3.5% expected—continuing the post‑2025 cooling trend amid rising inflation risks tied to surging energy costs.
UK labour market cools by less than expected in three months to February
Labour Market Trends and Economic Implications
Labour Market Overview
April 21 (Reuters) - Britain's labour market cooled only slightly in three months to February with earnings growth easing by less than forecast and the jobless rate falling unexpectedly although that drop reflected rising numbers of students not looking for work rather than rising employment.
Earnings Growth and Expectations
Average weekly earnings, excluding bonuses, fell to 3.6% in annual terms over the three months to February from 3.8% in the three months to January, the Office for National Statistics said on Tuesday.
Economists polled by Reuters had mostly expected regular average weekly earnings growth of 3.5%.
Bank of England's Perspective
The Bank of England is watching wages data carefully as it gauges inflation pressure in Britain's economy which investors view as highly vulnerable to the jump in energy prices caused by the war in Iran.
Unemployment Rate and Workforce Activity
Unexpected Drop in Unemployment
Economists said they were surprised by a drop in the unemployment rate to 4.9% from 5.2%. The Reuters poll had pointed to no change.
Factors Behind the Unemployment Figures
The ONS said the fall reflected a 169,000 increase in people considered to be inactive - or out of work and no looking for a job - over the three months to February, with employment also rising by 24,000.
Student Inactivity
Rising numbers of students who are not looking for work accounted for more than three-quarters of the shift into inactivity among 16-64 year-olds, the data showed.
Policy Responses and Outlook
BoE Policymakers' Views
BoE policymakers take different views over how much the weakness in the labour market will help to neutralise rising expectations of inflation among consumers.
Governor and Chief Economist Statements
BoE Governor Andrew Bailey said the central bank should keep a clear eye on risks to growth and jobs as well as inflation when making their next decision on rates.
The central bank's chief economist Huw Pill has emphasised that keeping inflation under control is the BoE's primary goal, and has criticised his colleagues "wait-and-see" messaging.
(Reporting by Andy BruceEditing by William Schomberg)
Key Takeaways
- •Regular pay growth softened to 3.6% in the three months to February, just above the 3.5% forecast and down from 3.8% in January (moneyweek.com).
- •The weakening labour market entering 2026—marked by the slowest nominal wage growth since late 2021—now faces renewed inflation risks from soaring energy prices after the Iran war outbreak (moneyweek.com).
- •The IMF has downgraded the UK’s GDP growth to just 0.8% for 2026 and warned that persistent energy-driven inflation will likely delay interest rate cuts, complicating the Bank of England’s policy path (moneyweek.com).
References
Frequently Asked Questions about UK wage growth cools by less than expected in 3 months to February
1What was the rate of UK wage growth in the three months to February?
UK wage growth, excluding bonuses, slowed to 3.6% annually in the three months to February.
2How did the wage growth compare to economists’ expectations?
Wage growth was slightly higher than expected, as most economists had forecast 3.5%.
3Why have inflation pressures increased in the UK?
Inflation pressures have increased due to the jump in energy prices caused by the war in the Middle East.
4How has the Bank of England responded to recent wage and inflation trends?
The Bank of England has delayed forecasts for cutting borrowing costs, due to emerging inflation risks and a weaker economic backdrop.
5Will UK workers find it harder to demand higher pay increases?
Officials suggest the weak economic environment may make it more difficult for workers to negotiate larger pay raises.
