Private sector wage growth has dropped to the lowest rate in five years, new official figures show. Public sector workers saw their annual earnings increase by 7.9%, while private sector staff saw an average 3.6% pay increase. The figures mean people are still getting pay rises, but they are smaller than they had been.

New unemployment figures released on Tuesday show the jobless rate remained at 5.1% in the three months to November – a period dominated by talk of a tough budget ahead. The rate had stood at 4.1% when Labour took office in 2024.

Unemployment is expected to rise to 5.3% by year-end as higher employment costs reduce demand for new staff. December HMRC payroll data shows 184,000 fewer employed than in 2024.

The increase in employers’ national insurance contributions and “skyrocketing” staffing costs, combined with concerns over the Employment Rights Act, hampered hiring and limited pay awards, according to the Institute of Chartered Accountants in England and Wales (ICAEW).