(Reuters) – Britain’s FTSE 100 dropped to a three-week low on Tuesday after domestic data showing strong wage growth prompted investors to pare bets on Bank of England (BoE) interest rate cuts next year.

The blue-chip index ended down 0.8%, while the mid-cap FTSE 250 lost 1.3%, its biggest one-day percentage fall in five weeks.

Bunzl was the worst-hit stock on the FTSE 100, down 5.7% after the business supplies distributor said that low prices, especially in continental Europe, would have a “slight impact” on its annual profit. The losses weighed on the general industrial sub-index, which was down 2.3%.

Official data showed British pay rose by more than expected in the three months to October, prompting investors to rein in rate cut bets for next year, lifting sterling and boosting domestic government bond yields.

The BoE is widely expected to hold rates steady this week, a day after the U.S. Federal Reserve announces its own policy decision, likely delivering a quarter-point rate cut.

In 2025, traders expect the BoE to cut rates by around 70 basis points, roughly in line with the scale of cuts from the Fed.

British inflation prints on Wednesday will shed further light on the BoE’s interest rate trajectory.

The construction and materials index led sectoral losses, with a 2.4% decline. Energy companies lost 1.7%, tracking a fall in oil prices as Chinese economic data renewed demand concerns. [O/R]

Chemring Group dropped 13% to the bottom of the mid-cap index after posting lower annual underlying pretax profit. The losses weighed on aerospace and defence stocks, down 1.4%.

Hollywood Bowl Group fell 11.5% after Britain’s largest ten-pin bowling operator posted lower annual adjusted pretax profit.

In contrast, Goodwin jumped 6.8% after the mechanical engineering firm posted a surge in first-half pretax profit.

(Reporting by Ankika Biswas and Sukriti Gupta in Bengaluru. Editing by Sonia Cheema and Mark Potter)