“With economic uncertainty so high, and payroll taxes increasingly onerous, it’s not surprising many UK employers are staying cautious, and unwilling to take the risk of hiring new staff,” said Susannah Streeter (pictured right), chief investment strategist at non-advisory investment broker Wealth Club.
The latest ONS labour market figures also showed that regular pay growth edged up to 3.5% in the year to June, from 3.4% previously, remaining above both inflation and the Bank of England‘s 2% target.
Streeter noted the increase was largely driven by higher pay settlements in the public sector, though private sector employers could face pressure to match those deals. She warned that policymakers would monitor closely whether higher payroll costs were being passed through to the prices of goods and services.
Regular wage growth in the three months to June 2026 was 3.5% excluding bonuses, up on the previous period.
Including bonuses the rate was 4.1%, down from the previous period.
Read the release ➡ https://t.co/8FKHMf2iHI pic.twitter.com/FyDXTJyGTT
— Office for National Statistics (ONS) (@ONS) August 18, 2026
Markets are currently pricing in two interest rate increases over the next 12 months, given the potential for renewed inflationary pressure.
The prospect of two further Bank of England rate increases over the coming year carries direct consequences for the mortgage market. Should the base rate rise, lenders are likely to reprice fixed-rate products upward, squeezing affordability for prospective buyers and increasing pressure on borrowers approaching the end of existing fixed terms. Swap rates, which underpin fixed mortgage pricing, have already been sensitive to shifting expectations around the rate path, and any sustained upward movement in gilt yields could reinforce that trend.