Market Analysis

UK pay growth has not increased since February 2021, according to the REC poll

Amos Simanungkalit · 07 Oct 202420K Views

Britain's job market displayed further signs of cooling in September, with pay growth rising at the slowest rate in nearly four years. This trend may provide reassurance to the Bank of England as it deliberates potential cuts to borrowing costs.

According to a report released on Monday by the Recruitment and Employment Confederation (REC) and KPMG, the growth rate for starting salaries for permanent positions reached its lowest level since February 2021. The index for monthly permanent job placements continued its downward trend, extending over two years; however, the decline in hiring was less severe than in August.

Jon Holt, KPMG's UK Chief Executive and Senior Partner, noted that businesses are grappling with uncertainties surrounding Britain's tax and economic policies ahead of Finance Minister Rachel Reeves' first annual budget scheduled for October 30. Reeves has indicated that certain taxes may rise as Prime Minister Keir Starmer's new Labour government aims to enhance public services and investment.

Holt mentioned that the easing of pay pressures could bolster the argument for a potential interest rate cut at the Bank of England's upcoming meeting in November. Recently, BoE Governor Andrew Bailey suggested that the central bank might adopt a more proactive stance and consider aggressive rate cuts if inflation pressures continue to diminish. Conversely, the central bank's Chief Economist, Huw Pill, emphasized a more cautious approach, advocating for gradual measures.

The REC/KPMG survey also revealed a continued increase in the number of candidates available for positions, while job vacancies declined for the 11th consecutive month, with the pace of decrease being the fastest since March.