Pay deals stabilise around 3.4% – but not beating inflation

Pay deals were averaging 3.4% for the lowest-paid in the three months to February 2025, with the public sector slightly higher at 3.7%. The median for this period remains broadly unchanged from January.

While pay deals have stabilised, inflation continues to outpace wage growth. RPI inflation in January stood at 3.6%, an increase from 3.5%, while CPI inflation rose to 3% from 2.5%. This trend places additional pressure on household budgets.

Several major price increases are set to take effect, including Ofgem's 6.4% energy price cap rise from April. Water bills will also rise, averaging an extra £10 per month, and regulated rail fares in England and Wales increased by 4.6% in March.

Low-paid workers should expect wage adjustments in April and May as minimum wage rates rise. Workers aged 21 and over will see a 6.7% increase to £12.21 per hour, with 18- to 20-year-olds earning at least £10 per hour. Employers accredited by the Living Wage Foundation have until May to implement higher rates.