Britain’s jobs market stayed weak with pay growth near a six-year low, the fewest vacancies since 2021 and hiring down, according to data that added to expectations that the Bank of England will keep interest rates on hold this week despite inflation pressure from the Iran war.
Average weekly earnings, excluding bonuses, grew by 3.5% in the three months to July compared with the same period in 2025, the Office for National Statistics said on Tuesday.
The pace of growth was close to its slowest since 2020 and was in line with the median forecast in a Reuters poll of economists.
LOW RISK OF WAGE SPIRAL
Job vacancies in the three months to August fell to 702,000, the lowest since 2014 excluding the COVID-19 pandemic period. Small businesses cited a high cost of employment as a reason for the lack of job postings.
The tax office’s preliminary measure of payrolled employees dropped by 26,000 in August. July’s reading was revised down to show a 19,000 drop in payrolls, from a flash estimate of 13,000.
Britain’s unemployment rate — which is based on a survey that is still in the process of being overhauled — held steady at 4.9% in the three months to July.
The pound weakened slightly against the U.S. dollar after the data, underscoring the challenge facing new Prime Minister Andy Burnham and his finance minister, John Healey, to kick Britain’s economy into a period of higher growth.
Analysts said the figures would allow the BoE to keep interest rates on hold on Thursday, barring a big surprise in price data due on Wednesday, which is expected to show headline inflation rose in August, pushed up by the impact of the Iran war on energy prices, but core inflation holding steady.
“Much looser labour market conditions than during the last major energy price shock in 2022 make a new price-wage spiral highly unlikely,” Andrew Wishart, senior UK economist at Berenberg, said.
“Nonetheless, we expect the BoE to signal that it will hike in November unless energy prices fall back, to guard against the risk of persistent high inflation.”
Oil prices rose again on Tuesday as concerns over supply disruptions persisted after attacks on Saudi Arabian energy infrastructure.
The BoE is trying to gauge whether higher energy prices caused by the Iran war will interrupt a gradual cooling of wage growth and underlying inflation pressure in Britain.
Private sector regular earnings — a key gauge of domestic inflation pressure — rose by 2.9% in annual terms during the three months to July, the weakest growth since the three months to October 2020, Tuesday’s data showed.
Investors were pricing a roughly one-in-three chance of a quarter-point interest rate hike by the BoE on Thursday. A hike at the following Monetary Policy Committee meeting in November was seen as a certainty followed by another in December.
The ONS said total average weekly earnings growth — including bonuses — slowed to 3.9% in annual terms in the three months to July from 4.2% in the three months to June.
“This figure is important because it is the earnings growth measure used in the triple-lock calculation that determines how much the state pension rises by in April 2027,” Heidi Karjalainen, senior research economist at the Institute for Fiscal Studies, said.
Many economists say the government should drop the triple lock — which indexes the state pension to whichever is highest out of average weekly earnings, inflation or 2.5% — as it could add tens of billions of pounds to future government spending.
Karjalainen said the data pointed to an increase in the full state pension to £250 per week from £241 per week.
Pat McFadden, Britain’s work and pensions secretary, said the ONS data pointed to a resilient labour market.
(Writing by Andy BruceGraphics）
