Labour's jobs nightmare worsens as new figures paint 'dire' picture for UK

Public sector salaries are soaring at more than double the rate of those working in the private industry, new figures show. Pay among civil servants, NHS workers and the wider sector soared by 6.1% in the three months to June. The sudden rise - up from 5.5% in the first quarter - was driven by NHS staff receiving their pay award earlier this year compared to 2025.

By contrast, wages in the private sector rose by 2.8% - lower than the rate of inflation, the Office for National Statistics (ONS) said. This was the weakest rate of wage growth in the private sector since October 2020, during the coronavirus pandemic. The ONS data showed that, after accounting for inflation, average pay excluding bonuses across the economy rose by 1% in real terms in June.

Figures published on Wednesday are expected to show that inflation climbed to 2.9% in July from 2.6% in the previous month.

It comes despite new Prime Minister Andy Burnham's pledge to "build a new economy" with good jobs in every region. Economists said the divergence between public and private sector wage growth is "unsustainable".

Julian Jessop, Independent Economist and IEA Economics Fellow, said: “Regular pay growth in the private sector has slowed to less than 3%, which will not be enough to keep pace with inflation in the second half of the year.

“In contrast, pay growth in the public sector is running above 6%. This divergence is unsustainable.”

Sluggish pay growth casts doubt on Andy Burnham’s pledge to raise living standards across the UK.

The data formed part of the latest snapshot of the UK’s “dire” labour market with unemployment remaining at a lofty 4.9% while vacancies slumped to 707,000 to the lowest level outside of the pandemic since 2014.

Mr Jessop added: “Today’s labour market data are dire. The UK economy continues to shed payroll jobs, with net losses of 94,000 over the past year and 188,000 since July 2024.

“The unemployment rate remains stubbornly high, with a big jump in the single month figure for June.

“Britain’s labour market is continuing to show the strain of the rising costs of employment.”

He said that Rachel Reeves’ decision to hike employer National Insurance is continuing to clobber firms.

“It should be no surprise that employers are responding by hiring fewer people, cutting vacancies and holding down wages,” he added.

“The Government cannot tax and regulate its way to a stronger labour market. Ministers should focus on reducing the cost of hiring, removing barriers to work and giving businesses the confidence to invest and create jobs.”

Andrew Griffith, Shadow Secretary of State for Business and Trade, said: "These figures show a jobs market that's ground to a halt.

"Businesses are still absorbing the cost of Labour's disastrous Employment Rights Act and tax rises and the worst is still to come.”