UK Wage Growth Slows as Iran War Drives Up Living Costs
UK wage growth has slowed down due to rising living costs caused by the ongoing Iran war. According to official figures from the Office for National Statistics, annual growth in average earnings including bonuses was 4.1% in the three months to June 2026. This is a decrease from 4.3% in the previous quarter and below analyst expectations of 4%. The public sector saw an annual average regular earnings growth of 6.1%, while the private sector experienced a 2.8% increase.
The cost of living crisis is driving higher energy bills, with official figures set to show that UK inflation rose to almost 3% last month due to these surcharges. Additionally, water regulator Ofwat is considering implementing 'surge pricing' on water usage during droughts, which would lead to increased costs for consumers.
The Bank of England may raise interest rates from September to combat sticky-high inflation and reduce its impact on the economy. UK vacancies fell by 6,000 or 0.8% in the May to July period, with decreases seen across nine industry sectors. The number of payrolled employees dropped by 86,000 or 0.3% annually.
'Small businesses are buckling under increased costs and changes to employment law,' said Danni Hewson, head of financial analysis at AJ Bell. 'Big jumps in public sector pay continue to influence wage growth numbers.'