UK pay growth slows to 3.9% ahead of key interest rate decision

Wage growth in the UK slowed in the three months to July, according to figures released by the Office for National Statistics (ONS), as workers faced renewed pressure from a cost of living squeeze that officials linked to disruption from the Iran war.

The ONS said average growth in total earnings, including bonuses, eased to 3.9% in the three months to July, down from 4.1% in the three months to June. The figure matched the forecasts of City economists surveyed ahead of the release.

The data is being closely watched by the Bank of England, which is preparing to set interest rates and will weigh the pace of wage growth against inflation pressures in its decision.

The figures are also likely to influence the size of the annual increase to the state pension under the government's triple lock policy, which uses wage growth, among other measures, to determine the uprating.

According to the source report, the slowdown in pay growth comes as workers face a renewed squeeze on living costs, which has been fuelled in part by rises in oil prices linked to the conflict involving Iran.

The Guardian reported that the wage data presents a challenge for the Bank of England as it balances the risks of persistent inflation against signs of a cooling labour market.