According to new data, 81 percent (or 1.8 million) of UK employees received lower pay awards in 2025 than they did last year. The median basic pay award remains at 3 percent for the seventh consecutive quarter. This continues a trend of wage restraint among the UK workforce.
Brightmine, a global data provider, has released findings at the same time as the UK celebrates the first anniversary of the Labour Government in the UK under the current economic conditions.
Sheila Attwood is the HR Insights and Data Lead for Brightmine. She said: “After a long period of historically high pay settlements to respond to inflation, now we are seeing a return of employer restraint.” “While the 3 percent rate is constant, it is also stagnant. Real-terms wage erosion is beginning to reappear, which means many workers will be worse off than inflation this year.”
The GDP shrank by 0.1 percent last month, after a contraction in the preceding month. In June, the Bank of England held interest rates at 4.25 percent, and a possible rate cut was suggested for August pending future economic developments.
The Office for Budget Responsibility forecasts that inflation won’t return to Bank of England’s target rate of 2 percent until the second quarter 2026. The labour market remains subdued due to the decline in vacancies and the decrease in employees who are paid, putting pressure on earnings.
Pay in the public sector continues to be higher than that of the private sector
Brightmine’s analysis of 195 pay awards made between April and 2025, covering more than 2.5 million UK workers, shows a growing gap between the public and private sectors. The median public-sector award was 4.3 percent compared to a private-sector award of 3 percent for the 12-month period ending June. This is a difference of 1.3 points, up from just 0.4 points one year ago.
The public sector has shown more resilience in terms of settlements, even though pay growth is slower across the board. Examples include a 4.5 % rise for the military and a 4 % increase for doctors and dental surgeons. These increases contributed to the higher median for this sector.
Industrial action persists despite this. Junior doctors will strike again in the coming weeks after rejecting a pay rise of 5.4 percent. The British Medical Association wants a 29 percent raise on top of the 8 percent average increase last year.
Attwood said, “Higher awards in the public sector have helped to keep the median up. But disputes like the junior doctor’s strike show that the government is not out of the woods yet.” Labour is under increasing pressure, one year into its tenure, to balance fiscal restraint and rising demands for critical services. This tension will only intensify.
All sectors are affected by the pay restraint
The median wage award for the current quarter remains unchanged at 3 percent. The median wage for the quarter was 4.8 percent, which is a stark contrast to the 3.8 percent figure in the same period last year.
A matched sample analysis shows that 81,2 percent of the 2025 pay agreements were lower than those made for the same employee group back in 2024. Only 4.8 per cent of the pay increases exceeded last year’s figures, while 13.9 per cent remained the same.
In total, 19.7 percent of settlements are based on a 3 percent award. The second most common award level is 2 %, which appears in approximately one deal out of seven.
The median for both basic and performance awards remains at 3 percent. The data shows that wage restraint is a common theme across the UK as organizations respond to economic uncertainty, and slow productivity growth.
Pay pressures will continue to be felt as inflation is forecast to remain higher than target until 2026, and there are ongoing disputes in the public sector. In the months to come, HR professionals will continue to struggle with balancing employee demands and organisational budget constraints.
