UK wage growth steady at 3.4% as BoE weighs inflation

Growth in British wages excluding bonuses stood at 3.4% in the first three months of 2026 compared with the same period a year earlier, according to official data released on Tuesday.

The figure matched expectations from economists polled by Reuters, who had forecast regular average weekly earnings growth of 3.4%.

The data comes as the Bank of England continues to closely monitor wage pressures while assessing inflation risks across the economy.

A recent surge in energy prices following the start of the war in Iran has added to inflation concerns for policymakers.

However, several Bank of England officials believe the slowdown in wage growth seen since early 2025 is likely to continue due to weaker hiring and broader economic pressures linked to the conflict.

Real wage growth remains limited

According to the data, annual growth in employees’ average earnings was 3.4% for regular earnings excluding bonuses and 4.1% for total earnings including bonuses.

After adjusting for inflation using the Consumer Prices Index including owner occupiers’ housing costs, annual growth in real terms was 0.1% for regular pay and 0.8% for total pay.

Using the Consumer Prices Index measure, which excludes owner occupiers’ housing costs, annual real regular pay growth stood at 0.3%, while total pay growth reached 1.0%.

The report noted that CPIH inflation averaged 3.3% during the January-to-March 2026 period.

The Office for National Statistics said average weekly earnings have continued to increase steadily over the long term, although nominal regular earnings growth has slowed over the past year.

Public sector pay growth outpaces the private sector

The public sector continued to record stronger earnings growth than the private sector during the first quarter of 2026.

Annual average regular earnings growth stood at 4.8% for the public sector, compared with 3.0% for the private sector.

Total earnings growth was 4.9% for the public sector and 3.9% for the private sector.

The data showed that the wholesaling, retailing, hotels, and restaurants sector recorded the strongest regular earnings growth after the public sector, with annual growth of 3.6%.

The finance and business services sector posted the strongest annual total pay growth rate at 5.4%, followed by the public sector at 4.9%.

The estimates were compiled using the Monthly Wages and Salaries Survey, which covers around 9,000 employers and approximately 12.8 million employees across Great Britain.

The survey response rate for March 2026 stood at 85.9%.

The Office for National Statistics said the earnings figures are estimates based on a sample of businesses rather than precise measurements across the entire economy.

It added that average weekly earnings can also be influenced by changes in workforce composition, including shifts between higher-paying and lower-paying industries.

The statistics agency further noted that seasonal adjustments and revisions may affect future estimates, particularly during periods of economic disruption or one-off shocks.