MNI INTERVIEW: UK Wage Deals Higher, But Measured - Brightmine

The pace of UK wage deals accelerated in the period to October, boosted by public sector pay settlements that came into force in late Q3, but the overall picture remains more nuanced, a leading employment expert told MNI.

"Public-sector settlements have lifted the median for this quarter, but the wider market continues to show a measured and cautious approach," Sheila Attwood, senior content manager for data and HR insights at Brightmine, said in an interview.

Agreed wage awards rose at a faster-than-expected 3.3% in the three months to October, higher than the 3% seen throughout much of 2025 and up from an upwardly-revised 3.1% in September, Brightmine’s survey showed.

“The move to 3.3% is notable but should be viewed in context," Attwood said.  "Employers are balancing affordability pressures with employee expectations, and most remain constrained in their pay decisions.”

2026 FOCUS AROUND 3%

Looking into 2026, the survey showed pay expectations remain centred around a 3% increase. 

The national-insurance-contribution hike announced in the April 2025 budget is continuing to weigh on employers' planning, and many still anticipate a negative impact on 2026 pay decisions. 

 Attwood said an improvement in the outlook is needed for a meaningful upturn in wage expectations.

“Unless economic conditions improve meaningfully, most organisations are preparing for another year of tight pay budgets," she said, as "early indications suggest that 2026 pay awards are likely to remain steady - and potentially edge lower - as cost pressures continue to weigh on employers.” 

Many on the Bank of England's Monetary Policy Committee still point to sticky high wage settlements as a reason for voting to keep monetary policy unchanged.

In  minutes of the BOE’s November policy meeting, Chief Economist Huw Pill said he prefers a "slower pace for the withdrawal of monetary policy restriction than delivered over the past 18 months, reflecting my longstanding concern that structural changes in price and wage-setting behaviour have generated stronger intrinsic inflation persistence in the UK, resulting in more sustained above-target underlying inflation." 

"Concerns about structural change are motivated by continued strength in services and wage inflation despite the apparent emergence of slack, and are supported by micro-level evidence on participation," he said. (see MNI INTERVIEW 2: BOE Cut Too Fast As Wages Spiral - Chadha )

Governor Andrew Bailey, the swing vote in November as the BOE stood pat, was cautious, though more muted. "Labour costs remain elevated and wage growth, while on a downward path of late, may plateau," he said in his statement for the minutes.

UNDERLYING WEAKNESS

Despite the higher headline number in Brightmine’s survey, the broader pattern across 2025 remains one of pay restraint, said Attwood, with three-quarters of this year’s deals lower than those awarded in 2024, with just over six in 10 worth 3% or less. 

At Brightmine’s November pay and labour market update webinar, 44% of organisations reported that their 2025 pay increase fell short of employee expectations, underscoring tensions between budgetary pressures and demands for higher awards, she added.