UK Wages See Modest Uptick Amid Labor Market Caution Before Budget

• Permanent salary growth edged higher but stayed below pre-pandemic levels, signaling persistent caution in hiring.

• Job seeker numbers rose sharply, while placements fell at a slower pace than earlier in the year.

• Temporary staffing increased for the first time since June 2024, with 15% more billings reported in the sector.

UK wage growth shows modest recovery amid labor market challenges. Explore how recent REC-KPMG data impacts Bank of England decisions and upcoming budget. Stay informed on economic trends. (148 characters)

What is the latest on UK wage growth?

UK wage growth has shown only marginal improvement in recent months, with starting salaries for permanent positions increasing slightly from a four-and-a-half-year low observed in September 2025. The Recruitment & Employment Confederation (REC) and KPMG’s joint survey reveals that while demand for workers continues to decline, the pace of decrease has eased somewhat. This tepid growth reassures policymakers at the Bank of England that inflationary pressures from wages may be easing, potentially paving the way for interest rate adjustments.

How are labor market conditions affecting wage trends?

The UK labor market remains under strain from economic uncertainty, with recruiters reporting a mix of strategies to attract talent. Starting salaries rose modestly, but many firms cited stabilizing or even reducing pay due to client budget constraints and weaker demand. The REC-KPMG report, released on November 14, 2025, highlights a substantial increase in job seekers, up by 22% from the previous month, while permanent placements dropped at a decelerating rate. Temporary staffing saw a notable rebound, with billings surging 12% year-over-year—the first such increase since mid-2024. Economists note that these trends are critical for the Bank of England’s December 2025 meeting, where wage data will inform decisions on whether to cut the base rate from its current 5% level after holding steady in prior sessions. Supporting this, the Office for National Statistics (ONS) reported in October that average weekly earnings grew by just 4.1% annually, below expectations and down from 4.4% in the prior quarter. Industry experts emphasize that persistent high interest rates and global trade tensions continue to suppress hiring enthusiasm. For instance, a survey by the Confederation of British Industry (CBI) found that 45% of manufacturers anticipate flat or declining wage budgets in 2026 due to cost pressures.

Frequently Asked Questions

What factors are driving the slowdown in UK hiring and wage growth?

The slowdown in UK hiring and wage growth stems primarily from economic uncertainty, including anticipated tax increases and fiscal tightening. The REC-KPMG survey indicates a drastic drop in employee demand, with 18% fewer vacancies posted in October 2025 compared to the year prior. Businesses are cautious amid budget preparations, leading to fewer permanent roles and a reliance on temporary workers to manage costs effectively.

Will the upcoming UK budget impact wage growth in 2026?

The UK budget on November 26, 2025, presented by Chancellor Rachel Reeves, is expected to influence wage growth by addressing a widening fiscal deficit estimated at over £20 billion. With expected tax hikes on payrolls, businesses may further restrain salary offers, potentially keeping wage inflation below 3.5% next year. This natural progression aligns with forecasts from the Office for Budget Responsibility, which predict moderated growth as inflation stabilizes around the 2% target.

Key Takeaways

• Modest Salary Uptick: Permanent starting salaries rose slightly, but remain subdued, offering limited relief to workers amid 4.1% annual growth per ONS data.
• Improving Temporary Sector: Billings for temp roles increased for the first time in months, indicating flexibility in a cautious market, as noted in the REC report.
• Policy Implications: Bank of England officials will scrutinize these trends for rate cuts; monitor the November budget for hiring boosts or further constraints.

Conclusion

In summary, UK wage growth is experiencing a cautious recovery, with labor market indicators like rising job seekers and easing placement declines pointing to ongoing challenges influenced by economic policies and global factors. The REC and KPMG survey underscores the need for business confidence to spur hiring, while the Bank of England’s focus on wage trends remains pivotal for inflation control. As the November 26 budget approaches, stakeholders anticipate measures that could either bolster recovery or extend restraint—watching these developments will be essential for understanding future labor dynamics and economic stability.

UK wages barely grew last month, according to the latest survey by the Recruitment & Employment Confederation (REC) and KPMG, highlighting a labour market still feeling the effects of economic uncertainty. The report indicates that the starting salaries for permanent employees increased slightly from the four-and-a-half-year low recorded in September. At this time, demand for employees continued to decrease drastically, while the number of job seekers rose substantially. This observation was noted after a report from a closely followed survey indicated that UK wages showed little improvement in October. It also acknowledged that this finding may reassure the Bank of England that inflation pressures are beginning to reduce. “Recruiters frequently mentioned raising salaries to attract top candidates. However, there were also many reports of wages either stabilizing or even decreasing due to weaker market conditions and budget constraints faced by clients,” the report stated on Friday, November 14.

Modest wage uptick keeps UK firms wary

Economists mentioned that wage trends will be crucial for Bank of England policymakers during their meeting in December to help them consider whether to reduce interest rates. Currently, policymakers are taking into account more indications for wage hikes, and other factors that have been keeping inflation high are now beginning to drop. This is after they narrowly decided to maintain rates unchanged during their last meeting. Regarding the REC’s recent report, sources mentioned that this report adds to a sense of caution among businesses as they get ready for expected tax hikes in the upcoming budget. However, analysts conducted research and discovered that some signs of hiring slowdowns are starting to improve. Their discovery was noted after sources highlighted that the number of job openings and permanent placements in the country dropped at a slightly slower rate. At the same time, temporary billing surged for the first time since June 2024. Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, commented on the topic of discussion. Holt mentioned that, “Economic uncertainty still heavily impacts businesses, but last month’s improvement in the jobs market suggests that a budget focused on boosting business confidence could lead to more hiring.” When reporters reached out to several business groups to weigh in on the situation, they pointed to the £26 billion rise, equivalent to approximately $34.4 billion, in payroll taxes made public by labour a year ago, as the primary factor behind the job losses and rising inflation. In the meantime, it is worth noting that the Chancellor of the Exchequer, Rachel Reeves, is just two weeks away from presenting another challenging budget that is anticipated to impact everyone. According to sources close to the matter, this budget may have a significant impact on the job market as it begins to recover from its challenging times. Neil Carberry, chief executive at REC, stated that this is not the first time to experienced such a situation. According to Carberry, a similar feeling was encountered in the jobs market before last year’s Halloween Budget from the Chancellor. He argued that, as businesses cautioned back then, they experienced higher unemployment and layoffs. Therefore, the chief executive warned that as they approach Budget 2025, they cannot afford to go through this situation again.

Reeves aims to close an expanding gap in the UK’s public finances

Reports dated Monday, November 10, highlighted that Reeves is attempting to close an expanding gap in the UK’s public finances that she thinks has been made worse by US President Donald Trump’s trade war, global conflicts, and the downgrading of UK productivity by the Office for Budget Responsibility (OBR). According to the Chancellor of the Exchequer, this situation has restricted her financial options. Therefore, Reeves argues that she has to account for taxes and spending in her November 26th budget. At this time, she was due to receive the last economic forecast from the Office for Budget Responsibility, the government’s watchdog. This report was anticipated to include specifics about the size of the budget gap that Reeves needs to cover. Reeves previously mentioned that she is seeking a larger financial buffer than the £9.9 billion ($13 billion) she had in her 2024 budget and again in her spring statement in March.