Public sector wage growth pushed overall UK pay figures above market forecasts between April and June, Office for National Statistics data has shown, as a widening divide between public and private employers raises fresh questions about the shape of the labour market recovery.
Total pay, including bonuses, rose 4.1 per cent in the three months to June, ahead of the four per cent consensus forecast among City economists and investors. Excluding bonuses, pay growth came in at 3.5 per cent, also slightly above expectations. Both readings were, however, lower than the figures recorded in the previous period.
Public sector wage growth at 6.1% against private sector’s 2.8%
The gap between sectors was the defining feature of the release. Public sector wage growth ran at 6.1 per cent, while private sector growth reached only 2.8 per cent. Liz McKeown, director of economic statistics at the ONS, attributed the public sector figure directly to the timing of NHS pay settlements. ‘The labour market picture is little changed overall, with some softening still evident,’ she said. ‘Private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards.’
The NHS pay context is material. According to the Department of Health and Social Care, the resident doctor pay award for 2025/26 averages 5.4 per cent, comprising a four per cent uplift plus a consolidated payment of £750, with the range running from 5.1 to six per cent depending on grade. Awards at that level, applied across large parts of the NHS workforce, have a material effect on the aggregate public sector pay reading.
Separate government figures suggest the divergence has widened further in more recent months. GOV.UK data prepared for the pay review bodies shows that public sector total pay growth reached 6.8 per cent in the third quarter of 2025, up from 3.4 per cent in the same period a year earlier. On a regular pay basis, which strips out bonuses, the public sector reading in Q3 2025 was 7.1 per cent against private sector regular pay growth of 4.2 per cent, underscoring the scale of the gap that has opened up.
Private sector softening raises questions for households
Martin Beck, chief economist at WPI Strategy, described the divide as ‘stark’. ‘Beneath the headline figures, the divide between the public and private sectors remained stark, with the public sector continuing to provide much of the support to employment and pay growth,’ he said. Beck also noted that private sector jobs had fallen considerably further than public sector jobs, which had increased since the start of the year.
Beck offered a mixed read on what the private sector figures mean for different audiences. ‘Slower private-sector wage growth is encouraging for the inflation outlook, but less so for households,’ he said. He pointed to the potential inflationary impact of the Iran conflict as a risk for real incomes in the second half of 2026, while acknowledging that falls in oil prices since late July could ease some of that pressure. ‘The worst of the labour-market deterioration may have passed, but consumers still face an uncomfortable period in which wage growth struggles to keep pace with prices,’ Beck added.
Unemployment held at 4.9 per cent, above what economists had expected. Payrolled employees increased by 3,000 between April and May, though the total remained around 85,000 below the level recorded a year ago. Vacancies fell by 6,000 to 707,000, the lowest reading in more than five years, though that decline was the smallest of the year to date. McKeown said the fall was driven mainly by smaller businesses, citing labour and operating costs as their reason for not hiring or replacing staff who leave.
Work and pensions secretary Pat McFadden said the figures were ‘encouraging’, pointing to a rise in the employment rate and a steady inactivity rate of 20.9 per cent. ‘We will continue to reform welfare and employment support so that more people can live independently and restore opportunity across the country,’ he said.
Looking ahead, the Bank of England has projected unemployment rising to 5.2 per cent, with some forecasts putting the peak closer to 5.5 per cent. If wage growth in the private sector continues to ease and unemployment climbs as projected, pressure on the Bank to raise rates in response to energy price shocks from Middle East trade disruption could diminish. The next set of pay review body decisions, against a backdrop of public sector regular pay already running at 7.1 per cent in Q3 2025, will test whether the government can hold that settlement line without reigniting the broader pay debate.
