UK wages continue to outpace inflation

Average wages are continuing to outpace inflation with pay packets rising for both the public and private sector workers, official figures show.

Pay, after taking into account the pace of price rises, rose 3.4% between October and December compared with the same period a year ago, according to the Office for National Statistics (ONS).

The UK's unemployment rate remained unchanged at 4.4%, although the ONS has advised that its jobs figures should be treated with caution because of low response rates to its employment survey.

The figures follow warnings from businesses that they are planning to cut workforces and raise prices ahead of higher employment costs in April.

Employers have raised concerns that paying more in National Insurance, along with minimum wages rising and business rates relief being reduced, could hit pay rises going forward and also affect investment.

Yael Selfin, chief economist at KPMG UK, said the latest employment figures indicated that hiring intentions had "weakened significantly".

She said the hospitality and retail sectors were expected to be "disproportionately affected" by the incoming cost hikes due to them employing a higher proportion of lower-wage workers.

Without taking account of inflation, the ONS said annual pay growth, excluding bonuses, was 5.9% from October to December. Earnings growth for the private sector was 6.2%, while for the public sector it was 4.7%.

The UK's inflation rate, which measures the rate consumer prices rise at over time, was 2.5% in the year to December.

Ms Selfin said she expected a "steady downward trend" in pay growth in the coming months.

"Demand for staff has declined, with vacancies remaining at close to pre-Covid levels. Additionally, there has been a marked improvement in the availability of workers," she added.