UK pay awards lowest in three years, IDR survey shows

LONDON (Reuters) - Pay awards granted by British employers cooled during the three months to February, according to a survey that chimed with an official gauge of slowing wage growth that should keep the Bank of England on track to reduce borrowing costs later this year.

Incomes Data Research said on Wednesday that the median pay rise awarded by major employers dropped to 3.5% in the three months to February, the lowest reading in three years and down from 4.0% in the three months to January.

Overall pay settlements fell to 3.2% from 3.5%, the lowest since the three months to February 2022.

Official figures showed British pay growth slowed marginally in the three months to January to 6.1% while inflation cooled more than expected in February.

The BoE, which held interest rates at 4.5% in March, is closely monitoring wage growth. It expects private-sector pay to slow to 3.75% by the end of this year.

Zoe Woolacott, senior researcher at IDR, said median pay settlements across the economy could rise in April due to the increase in the minimum wage, which came into effect on Tuesday, and the outlook for inflation and the jobs market.

"Wage rises tend to lag behind inflation, and so the former may eventually follow the upward trend in the latter, depending on the extent of any rise in inflation," Woolacott said.

Some surveys have shown a hit to hiring from employers adjusting to an increase in social security contributions that will come into force on April 6, and Britain's budget regulator halved its forecast for economic growth this year to 1%.

IDR's survey, covering pay deals for more than 230,000 employees, was based on 75 awards between December 1, 2024 and February 28.

(Reporting by Suban Abdulla, editing by Andy Bruce)