In the period up to May, the Office for National Statistics confirmed that the average worker’s pay increased by only 0.4% when accounting for inflation. This uptick in real terms pay was slightly higher than the 0.3% seen in the previous three months, reflecting the ongoing financial strain on many UK households.
As new Prime Minister Andy Burnham gears up to address the cost of living crisis, he announced the removal of VAT on electricity bills, expecting to reduce the average bill by £45. The ONS data showed that regular pay, excluding bonuses and inflation, increased by 3.4% in the three months to May, a significant slowdown compared to the 5.1% growth seen in April 2025.
Despite the decrease in inflation to 2.8% in May, experts anticipate a further decline to 2.6% in June. Susannah Streeter, chief investment strategist at Wealth Club investment service, warned of potential cost increases in fuel, transport, and business due to escalating tensions in the Middle East. This could lead to higher interest rates and impact buyer affordability.
In addition, concerns about the job market persist, with the UK’s jobless rate remaining at 4.9% in May, and an estimated 1.76 million people unemployed. The number of vacancies also decreased slightly, with the employment rate for individuals aged 16 to 64 at 75.1% in March to May.
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