In the three months leading up to May, the average worker experienced a meager 0.4% increase in pay when factoring in inflation, as confirmed by the Office for National Statistics. This uptick in “real terms” pay is a slight improvement from the 0.3% rise seen in the previous three-month period, underscoring the continued financial strain on numerous UK households.
This data release coincides with the new Prime Minister Andy Burnham’s imminent announcement of interventions to address the escalating cost of living crisis on his inaugural full day in office.
One of his initial acts as Prime Minister was the elimination of VAT on electricity bills, a move aimed at reducing the average bill by £45, as pledged in his first address from Downing Street.
According to the ONS, regular pay excluding bonuses and prior to inflation saw a 3.4% uptick in the three months leading to May, marking a significant slowdown compared to the 5.1% growth recorded in April 2025.
Despite this, the simultaneous decline in inflation has partly cushioned the impact. The consumer price index inflation rate was 2.8% in May, with projections indicating a drop to 2.6% in June when data is released by the ONS.
Susannah Streeter, chief investment strategist at Wealth Club investment service, warned of potential short-lived relief due to escalating tensions in the Middle East, likely leading to increased costs in fuel, transportation, and business operations in the months ahead.
She further noted a shift in interest rate expectations, with financial markets pricing in at least two rate hikes, which could impact affordability and potentially deter more buyers from entering the market.
Mr. Burnham’s assumption of office coincides with concerning developments in the employment landscape. The ONS reported a jobless rate of 4.9% in May, consistent with April figures, with 1.76 million individuals unemployed, heightening concerns of a potential uptick in unemployment in the near future.
During the three months leading to May, the estimated number of job vacancies dropped by 7,000 to 712,000, albeit surpassing the 707,000 vacancies in the previous quarter, which marked the lowest level since early 2021.
The UK employment rate for individuals aged 16 to 64 was pegged at 75.1% between March and May, showing a slight decline compared to the previous year but a marginal increase from the latest quarter.
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