UK Pay Growth Slows Amid Rising Energy Prices Ahead of Interest Rate Decision

Pay growth in the UK has slowed down to 3.9% in July, according to figures from the Office for National Statistics (ONS). This is a decrease from 4.1% in June and matches forecasts by City economists.

The ONS reported that average earnings, including bonuses, grew at this rate over the three months to July. The figure will impact the state pension increase under the triple lock system, which ensures the benefit rises by either 2.5%, inflation, or average wage growth, whichever is highest.

Meanwhile, the number of workers on company payrolls continues to decline, driven by a drop in jobs in the retail and hospitality sectors. Vacancies have been at their lowest level outside the pandemic period for more than a decade, with smaller businesses citing increased labour costs as a reason for not hiring.

The Bank of England is set to consider its response to rising global energy prices triggered by the Middle East conflict before a crucial meeting on Thursday. City investors expect the base rate to remain unchanged at 3.75%, but see a slight chance of a quarter-point rise to combat inflationary pressures.