UK wage growth is now at its lowest in five years – unless you work for the government
Key Points
- Public sector pay grew 5.5% in the year to May 2026 - nearly double the private sector's 2.9%
- Whole-economy regular pay growth of 3.4% is the lowest in over five years
- Real pay growth after inflation stood at just 0.3%
- Services posted the strongest growth outside the public sector at 3.7%
- Falling vacancies and steady redundancies are easing pressure on employers to raise wages
Public sector workers received pay rises of 5.5% in the year to May 2026 – nearly double the 2.9% growth recorded in the private sector.
The gap emerges from the CBI’s July Labour Market Update, which reports that nominal regular pay growth across the whole economy stood at 3.4% – its lowest level in over five years. According to the ONS figures underpinning the update, the last time the figure came in lower was the quarter to October 2020, at 2.8%.
The 3.4% whole-economy figure has now held for three consecutive periods, masking a sharp split between public and private pay.
Private sector pay growth of 2.9% trails the public sector’s 5.5% by a wide margin, though the CBI notes the public sector figure has varied in recent months largely due to pay award timings.
Outside the public sector, services delivered the strongest regular annual growth at 3.7%. Total pay growth including bonuses ran at 4.3% across the economy.
What it means after inflation
Adjusted for inflation using CPIH, real regular pay growth stood at just 0.3% – slightly above last month’s revised figure of 0.1%. Real total pay, including bonuses, grew 1.1% over the same period.
On the more volatile single-month measure, real regular pay grew 0.4% year on year, slightly below last month’s 0.5%. In practical terms, the average worker’s pay is barely outpacing prices, and private sector workers are falling furthest behind the headline figures.
The slowdown comes alongside a cooling jobs market.
Vacancies fell to 710,000 in the three months to May 2026, down 15,000 on the quarter and 27,000 on the year, while redundancies dropped to 108,000.
With 2.5 unemployed people per vacancy, a ratio unchanged since September 2025, employers face less pressure to bid up wages to attract staff.
