Pay growth rises despite employers cutting jobs as Bank faces dilemma over rate cuts

Pay growth rose in November despite evidence of employers cutting jobs after Rachel Reeves's tax-raising budget, underlining a dilemma for the Bank of England as it considers cutting interest rates next month.

- Richard Partington

With the government under pressure on the economy, the Office for National Statistics (ONS) said yesterday that annual growth in average weekly earnings rose by 5.6% in the three months to the end of November, up from 5.2% in the three months to October.

City economists had forecast total annual pay growth would accelerate. The reading matched estimates for total pay but was marginally higher than expected for regular pay excluding bonuses.

At the same time, the figures showed the unemployment rate for people aged 16 and over rose to 4.4% in the three months to November, up from 4.3% in the three months to October, highlighting evidence of a cooling jobs market since the budget.

After turbulence in bond markets earlier this month, the latest snapshot will complicate the picture for the chancellor, amid warnings that higher borrowing costs could require tax increases or spending cuts to avoid breaking her fiscal rules.

Yesterday Reeves said she would present the results of a spending review that will set the multi-year budget plans for government departments on 11 June.