Bank of England surveys signal UK pay growth to hold near 3.5% in 2027
UK businesses expect wage increases to remain close to current levels next year, according to Bank of England survey results released on Friday. The findings suggest domestic pay pressures are easing only slowly, a dynamic that is likely to remain in focus for policymakers concerned about inflation.
Highlights
- Bank of England Decision Maker Panel survey shows firms expect wage growth of 3.4% over the next year, unchanged from the previous reading.
- BoE Agents' Summary of Business Conditions reports companies anticipate average pay settlements of 3.6% in 2027, slightly higher than prior forecasts.
- Stable wage expectations near 3.5% could complicate Bank of England efforts to ensure easing inflation as labour costs remain central to monetary policy outlook.
BoE surveys point to steady wage expectations
As reported by Reuters, two Bank of England surveys show employers continue to expect pay growth of roughly 3.5% over the coming year and into 2027, indicating little change in wage-setting plans.The Bank of England's Decision Maker Panel survey, covering the three months to October, says firms expect wage growth of 3.4% over the next year. That is unchanged from the previous reading based on the three months to September.
A separate BoE Agents' Summary of Business Conditions reports that companies expect average pay settlements for 2027 to be around 3.6%. That is broadly similar to this year and slightly higher than previously forecast.
Inflation outlook remains in focus
Stable pay expectations at these levels are likely to matter for Bank of England officials who are most concerned about broader inflation pressures. Even without an acceleration, wage growth holding near current rates can complicate efforts to ensure domestic price pressures ease sustainably.The survey readings suggest businesses are not preparing for a sharp slowdown in pay awards, despite expectations that inflation pressures should moderate over time. For the UK economy, that keeps labour cost trends central to the outlook for monetary policy and business operating costs.
In our earlier article on economists’ expectations for a Bank of England rate hike to 4.0%, we explained how persistent inflation and firmer UK economic data were shifting views toward tighter policy. We also noted that inflation was still forecast to run above the BoE’s 2% target in coming quarters, keeping the path of Bank Rate and broader price pressures in focus for policymakers.
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