Private sector pay growth falls to 2.8%, lowest in six years
ONS figures put private sector pay growth at less than half the public sector rate of 6.1 per cent, with vacancies down to 707,000. Founders setting next year's salary bands have more room and fewer candidates chasing them.
Pay in the private sector grew by 2.8 per cent in the three months to June, the Office for National Statistics said on Tuesday. It is the weakest rate since the three months to October 2020.
Public sector pay grew by 6.1 per cent over the same period. That is more than double the private rate.
The private figure was 2.9 per cent in the previous quarter. The public figure was 5.5 per cent, so the gap widened from both directions at once.
The ONS attributes the public sector jump to the timing of NHS pay awards, which landed this year rather than in 2025. That is a calendar effect, not a permanent premium.
Vacancies fell by around 4,000 over the quarter to 707,000. The peak was nearly 1.3 million in 2022, and the current level is the lowest outside the pandemic since 2014.
The unemployment rate held at 4.9 per cent. Unemployment among 18 to 24-year-olds edged down to 14.6 per cent from 14.8 per cent, close to an 11-year high.
The economic inactivity rate was unchanged at 20.9 per cent.
Single-month estimates for June alone showed unemployment at 5.4 per cent, up from 4.6 per cent in May. The ONS says those monthly readings should be treated with caution, and the survey behind them has suffered falling response rates for several years.
Across the whole economy, average pay excluding bonuses rose 1 per cent in real terms in June. Inflation figures due on Wednesday are expected to show the annual rate rising to 2.9 per cent in July from 2.6 per cent.
Productivity, measured as output per hour worked, rose 0.7 per cent in the second quarter against the same period in 2025.
Bank Rate has been held at 3.75 per cent since December, and the Bank of England's governor has played down the prospect of near-term cuts. Yael Selfin, chief economist at KPMG UK, said the figures "will provide the Bank of England with further evidence that its cautious approach to monetary policy remains the most appropriate path". James Smith of ING expects rates on hold until next spring, then at least two cuts in 2027.
For a founder writing next year's salary bands, the market rate is rising more slowly than at any point since 2020, and there are 707,000 vacancies competing for candidates rather than 1.3 million. Fewer counter-offers, more applicants per role.
The catch sits on both sides of the ledger. If inflation reaches 2.9 per cent in July, a 2.8 per cent raise is a pay cut in real terms, and staff will notice before the next review cycle does. Anyone hiring against the NHS or another public employer is now bidding against a 6.1 per cent increase.