UK pay grows faster than expected

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UK pay grew more quickly than expected in the three months to May, adding to pressure on the Bank of England as it tries to tame inflation.

Annual growth in employees’ average total pay, which includes bonuses, was 6.9 per cent in the three months to May, up from a revised 6.7 per cent in the three months to April, according to data published by the Office for National Statistics on Tuesday.

The figure was stronger than the 6.8 per cent forecast by economists polled by Reuters.

Growth in regular pay, which excludes bonuses, was also stronger than expected at 7.3 per cent over the same period, above analysts’ forecasts of a decline to 7.1 per cent.

In March to May 2023, average regular pay growth for the private sector was 7.7 per cent, the fastest increase outside the pandemic period.

Policymakers at the Bank of England are closely monitoring wage pressures and the tightness of the labour market as they judge how far to raise interest rates to take inflation back to its 2 per cent target. 

On Monday, Bank of England governor Andrew Bailey and chancellor Jeremy Hunt joined forces to call for wage restraint, as they told a City of London audience that high pay settlements were hampering the fight against inflation.