Private sector wage growth has fallen to its weakest level since the Covid pandemic, as new figures reveal mounting pressure on Britain’s jobs market.
Figures released by the Office for National Statistics (ONS) on Tuesday show that annual growth in regular private sector earnings slowed to 2.8 per cent in the three months to June 2026.
By comparison, regular earnings growth in the public sector stood at 6.1 per cent over the same period. The ONS has cautioned that public sector figures continue to be affected by differences in the timing of pay awards this year.
Across the economy as a whole, annual growth in regular earnings, excluding bonuses, was 3.5 per cent in the three months to June, while total earnings including bonuses increased by 4.1 per cent.
The latest figures also show that unemployment remained at 4.9 per cent among people aged 16 and over during April to June. The rate was 0.2 percentage points higher than a year earlier, although it fell by 0.1 percentage points compared with the previous three-month period.
There were further signs of caution among employers.
The number of employees on company payrolls fell by 13,000 between May and June, according to HM Revenue and Customs data used by the ONS. Compared with June 2025, the number was down by 78,000.
Looking at the April-to-June quarter as a whole, the number of payrolled employees was 86,000 lower than during the same period last year and 37,000 lower than in the previous quarter.
Job vacancies have also continued to fall. There were an estimated 707,000 vacancies across the UK between May and July, down by 6,000 compared with the previous three months.
The ONS said feedback from its Vacancy Survey suggested some smaller businesses were choosing not to recruit because of higher labour costs and other operating expenses. Vacancy numbers are now at their lowest level since early 2021 and, excluding the pandemic period, their lowest since late 2014.
The contrast between public and private sector wage growth is likely to attract political attention.
Private sector regular pay growth of 2.8 per cent is the weakest recorded since October 2020. Public sector regular earnings, meanwhile, increased by more than twice that rate, although the timing of NHS and other public sector pay awards has influenced the comparison.
The figures come amid continued concern from businesses about the cost of employing staff. The ONS itself reported that increased labour and operating costs were among the reasons given by smaller firms for holding back on recruitment.
Economists will also be watching the wage figures closely ahead of future Bank of England interest rate decisions.
Slower private sector wage growth could reduce concerns about domestically generated inflation and lessen the immediate pressure for higher interest rates. However, renewed increases in energy prices linked to conflict in the Middle East have added another source of uncertainty for policymakers.
Despite the weaker payroll and vacancy figures, the overall picture is not one of employment collapsing. The employment rate for people aged between 16 and 64 was estimated at 75.1 per cent during April to June, up slightly on the previous quarter but 0.2 percentage points lower than a year earlier.
Economic inactivity among people aged 16 to 64 stood at 20.9 per cent, broadly unchanged both on the quarter and compared with a year ago.
The latest figures therefore paint a mixed but subdued picture of the British labour market: unemployment remains relatively stable, but payroll employment has fallen, vacancies are at historically low levels and private sector wage growth has weakened considerably.
For businesses already facing higher operating and employment costs, the coming months will provide an important test of whether recruitment begins to recover or employers continue to keep hiring plans on hold.