London: Wage growth in the United Kingdom slowed at the end of 2025 while unemployment increased, according to new figures from the Office for National Statistics, pointing to a cooling labour market and mounting economic pressure.
Regular pay excluding bonuses rose by 4.2 percent in the three months to December, down from 4.4 percent in the previous period. Private sector wage growth fell more sharply to about 3.4 percent, the lowest level in roughly five years.
At the same time, the unemployment rate climbed to 5.2 percent, the highest level seen in recent years outside the pandemic period. The data suggests employers are becoming more cautious about hiring as economic growth remains weak.
After adjusting for inflation, real wages increased only modestly, meaning many households are seeing little improvement in purchasing power despite slower price rises.
Employment indicators also show a softening jobs market. Payroll numbers have declined over the past year, redundancies are rising, and there are now more job seekers competing for each vacancy.
Economists say weaker economic activity, rising business costs and recent tax and wage policy changes are contributing to slower pay increases. Earlier public sector pay settlements continue to keep government wage growth higher than in the private sector.
The figures have strengthened expectations that the Bank of England could begin cutting interest rates in the coming months as easing wage pressures may help reduce inflation risks. The pound slipped slightly after the data release, reflecting investor concerns about the pace of economic growth.
The labour market slowdown comes as the UK economy struggles with weak growth and lingering cost of living pressures, leaving many households cautious about spending and businesses wary about expansion.