Finance
UK labour market lost more momentum before budget
Published by Global Banking and Finance Review
Posted on January 20, 2026
2 min readLast updated: January 20, 2026
Quick Summary
UK wage growth slowed to 4.5% in the three months to November. The Bank of England is monitoring this as a key inflation indicator.
UK Job Market Shows Signs of Weakness Ahead of Budget Announcement
Overview of the UK Job Market
LONDON, Jan 20 (Reuters) - Britain's jobs market weakened in the run-up to November's budget announcement by finance minister Rachel Reeves, according to official data published on Tuesday which showed a drop in employment and a cooling of wage growth.
Payroll Data Decline
A measure of payrolls data from the tax office showed a drop of 43,000 in December from November, the biggest monthly fall since November 2020 although there have been bigger preliminary estimates of falls in that period which were subsequently revised up, an ONS official said.
Annual Pay Growth Trends
A fall of 38,000 first reported for November was revised to show a decline of 33,000 people in payrolled employment.
Impact on Inflation and Interest Rates
Annual pay growth in the private sector excluding bonuses - which is being closely watched by the Bank of England - slowed to 3.6% in the three months to November, its slowest rise since the November 2020, from 3.9% in the three months to October.
Overall core pay growth slowed to 4.5% in the September-to-November period compared with a year earlier, slightly below the 4.6% growth in the three months to October and in line with economist expectations in a Reuters poll.
The jobless rate held at 5.1%, as expected.
"The number of employees on payroll has fallen again, with reductions over the last year concentrated in retail and hospitality, and reflecting ongoing weak hiring activity," ONS Director of Economic Statistics Liz McKeown said.
The Bank of England is watching pay as a gauge of how long Britain's still high rate of inflation is likely to last.
Financial markets on Monday showed that at least one 0.25 percentage-point interest rate cut was fully priced in for 2026, with a roughly two-thirds chance of two cuts.
Data published last week showed stronger-than-expected growth in the economy in November after months of caution among businesses before finance minister Rachel Reeves' budget at the end of that month.
(Reporting by Suban AbdullaEditing by William Schomberg)
Key Takeaways
- •UK wage growth slowed to 4.5% in the three months to November.
- •The Bank of England is monitoring wage growth amid inflation concerns.
- •Economists expected a slowdown from 4.6% in October.
- •Financial markets anticipate interest rate cuts in 2026.
- •UK economy showed stronger-than-expected growth in November.
Frequently Asked Questions about UK labour market lost more momentum before budget
1What is wage growth?
Wage growth refers to the increase in the average pay of employees over a specific period, often expressed as a percentage. It reflects changes in labor market conditions and can impact consumer spending.
2What is inflation?
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) or Producer Price Index (PPI).
3What are interest rates?
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central bank policies and can affect economic activity.
4What is the role of the Bank of England?
The Bank of England is the central bank of the UK, responsible for maintaining monetary stability, issuing currency, and overseeing the financial system to promote economic growth.
